Treasury admits the R4.3 billion budgeted for Covid-19 vaccines might be insufficient, yet government continues to throw taxpayers’ money at ailing SA Airways.
Not only have the multibillion-rand bailouts to SA Airways (SAA) been at the expense of the poor through consistent budgetary cuts to health, housing and education but they also reek of unfair competition, especially when National Treasury has acknowledged there may not be enough money for Covid-19 vaccinations.
The latest cash injection to the failing state airline is against the backdrop of Treasury saying the R4.3 billion set aside for Covid-19 vaccines may not be enough, which raises questions about government’s priorities.
Treasury director-general Dondo Mogajane told parliament’s standing committee on finance this week a contingency reserve for vaccines would “kick in” if there was a need. Treasury noted last month net domestic short-term loans had increased by R9.4 billion, while net domestic long-term loans “inclusive of redemptions and switch transactions increased by R26 649 million”.
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Treasury allocated an additional R1.25 billion to the department of health to purchase Covid-19 vaccines and another R2.82 billion to social development for the R350 social relief grant.
Zukiswa Kota, programme head at the Public Service Accountability Monitor, Rhodes University, said SAA had received more than R25 billion in bailouts and loan guarantees in recent years, but was technically insolvent, with insufficient funds to support operational costs.
She said the choice to issue bailouts should not be used as justification to implement cuts on social spending.
Funding SAA and other failing state-owned entities through reductions to the baselines of national departments, public entities and conditional grants was simply not prudent if government was serious about addressing poverty and inequality.
“These public resource management failures have an adverse impact on core developmental needs,” she said.
“The costs are very high – they occur at the expense of [pupils] in public schools, communities with suboptimal access to water, sanitation and health services.”
Solidarity deputy general secretary Marius Croucamp lamented that SAA was to receiveR1.7 billion from Treasury and its subsidiaries, Mango R819 million, Air Chefs R218 million, while private airlines FlySafair, Comair and Airlink receive nothing.
He said although it would require SAA’s competitors to lodge a complaint with the Competition Commission, the industry in general should be assisted.
“Everyone is trying to survive. What the SAA is getting is not only for Covid-19 distress but for other things, like mismanagement.”
He said private airlines faced similar challenges but did not receive any assistance.
The Competition Commission confirmed the perpetual bailouts amounted to unfair competitive behaviour and it was generally against such subsidies.
“The commission wishes not to comment on this matter. We wish to allow all relevant parties, including government, the necessary space to deal with the matter independently.
“Subsidies of this nature do distort competition and we advocate against them in general, but they are not regulated by law,” spokesman Siya Makunga said.
Economics professor Patrick Bond said the bailout came as Treasury was claiming austerity was required for social grant recipients, civil servants and basic infrastructure.
“Finance Minister Tito Mboweni has been presiding over a rapid worsening of income and wealth inequality in what was already the world’s most unequal economy – so civil society may challenge the constitutionality of his budget,” Bond said.