Finance Minister Malusi Gigaba told the media after a meeting with the CEO initiative that the decision on how SAA would be recapitalised should be presented to and approved by cabinet by the end of next month.
It appears that ahead of providing another R10 billion to SAA (which is probably closer to R12 billion following Citibank’s decision to recall its loan) government didn’t pause to reconsider whether owning a state asset (or liability) like SAA was the best use of a dwindling supply of resources. This is despite the fact that the business has a dismal track record of profitability.
Gigaba reiterated government’s commitment to owning an airline saying, “we are on the southern tip of Africa, and as such, far away from the busy routes of the northern hemisphere. We do need a state-owned airline. We need to guarantee air travel for tourism and investors to our country. The best way to do that is to have an airline.”
Part of Gigaba and National Treasury’s sustained commitment to owning the airline also comes from the fact that, from where they sit, there are obvious inefficiencies that could make massive inroads in transforming the airline into a profitable and sustainable business.
“We have had so many inefficiencies at the airline, but it can be run on a sound basis. Forensic reports [that have been commissioned] indicate that we could improve profitability by as much as R1.5 billion to R2 billion per annum by altering inefficient contracts,” Gigaba said.
“But we also need proper management, and a sound board. We need to have a strategic equity partner. All of these things put together will make it a sound airline.”
Despite specific questions from the media on what options are being considered to raise the R10 billion that Treasury believes will adequately recapitalise the airline, Gigaba did not provide details. He chose rather to reiterate that the recapitalisation would most likely be funded through the sale of “non-core” assets – something many have interpreted as government electing to sell its shares in Telkom. He also made it abundantly clear government was running out of time to put a solution in place.
The tenure of Dudu Myeni as chairperson of the airline appears to be coming to an end. The current chairperson has served for eight years.
According to King IV [standards on corporate governance] a director should serve for three years, renewable once, so that you do not become assimilated into the organisation. She has served eight years, which is two years longer than she needed to. So, it’s time to hand over.
Surrounded by business luminaries, including Stephen Koseff, Adrian Gore and Dick Enthoven, the CEO Initiative, led by the likes of Jabu Mabuza (Busa) and Colen Garrow (Goldman Sachs), aims to foster open and mutually beneficial engagements between business and government.
In response, Busa president Mabuza, who is also the chairman of Telkom, chided government for allowing details of a potential sale of its Telkom shares to become public.
“At Telkom, we do not choose our shareholders. We want our shareholders to be careful about what they say about what they will do with their shareholding. Please do not create unnecessary problems for us.”
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