Editorial: It is time for a frank talk about our SOEs

Johannesburg – The move to privatise SAA while retaining a significant stake in the struggling airline offers the government an opportunity to reset and reprioritise state-owned enterprises (SOEs).

No prudent South African should shed a tear for the moribund SAA.

The company has not made a profit since 2011 despite receiving R57-billion in bailouts since 1994 – something which is unheard of in a serious business operation.

SAA has for many years been a mismanaged entity.

It had for some time been used to provide cushy executive and board positions to those close to power, some of whom hardly have any clue about fiduciary responsibility.

There are examples of governments that have managed to run good airlines, free from corruption and mismanagement.

However, because of mismanagement and misuse of SAA, the airline was bound to collapse.

Before it was placed on business rescue, the woeful national airline’s financial statements revealed a sorry state of affairs with losses of R16-billion over a period of three years.

That is why we agree with sentiments such as those previously expressed by the Minister of Mineral Resources and Energy Gwede Mantashe that SAA is an airline for the elite that should be sold.

Mantashe was, in other words, saying that SAA is not imperative but a nice to have.

He was correct in his analysis that the airline did not benefit the ordinary working class.

“You can give SAA to anyone to run it … it is not flying the working class. The only ones who are ferrying the working class are the buses and the taxis. If we were giving this money to the buses, taxis and trains, you would have a case,” said Mantashe at the time.


Mantashe was also correct when he said that if SAA was to survive, it needed to make money otherwise it should be handed over to those who could run it.

A case in point is British Airways, the flag carrier of the UK. Despite that nationalistic-sounding tag, British Airways was privatised in the late 1980s and is now wholly owned by IAG, an Anglo-Spanish airline consortium.

We must, however, caution that the move to partially sell the SAA should not open the floodgates for mass privatisation of entities such as Eskom and Transnet that are key to the country’s developmental agenda. More money should be directed to fixing public transport and entities such as Prasa to restore the dignity of the working class who rely on public transport to ferry them to work.

Serious attention must be placed on good governance of these SOEs. China provides a good example of SOEs that are legal entities, separate from the government.

These legal entities are second to none when it comes to corporate governance. According to conservative estimates, SOEs account for about 30% of China’s GDP.

In China, SOEs run big airlines and they thrive as they ensure distance between airline management and the owners. It is about time that we start non-sentimental discussions on our SOEs and prioritise those that serve the national interest rather than those that are merely a source of luxury.

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