Pravin Gordhan desperately wants to maintain a national carrier in South Africa. As South Africa’s Minister for Public Enterprises, the key to a new or revitalized airline rests in Gordhan’s hands.
One Man’s Effort To Save South African Airways
There’s still uncertainty over the future of South African Airways. Last December, SAA was placed into Business Rescue, the South African equivalent of Chapter 11 bankruptcy in the USA. Due to COVID-19, the airline is currently not operating flights. Administrators tried to fire all employees, but a labor court blocked the move. Still, employees have not been paid in weeks.
> Read More: South African Airways Lives To See Another Day After Court Forces It To Keep Flying
Gordhan sees a national airline as a national necessity and still believes that an investor can be found. But with airlines collectively losing around 500 million dollars per day and the South African economy hard-hit by COVID-19, this is shaping up to be a more difficult task than ever. There’s also South African law, which limits foreign ownership to 25% (not that creating a South African shell company would be an insurmountable obstacle). Plus, South Africa still wishes to exercise “some degree of control” over the new or reconstituted airline, which could be the biggest drawback to any investor. Yet Gordhan is adamant that SAA cannot simply dissolve.
“Winding down is not an option. The purpose of providing R5.5 billion post business rescue commencement funding was to complete the business rescue process, which must end with a cost effective and streamlined airline.”
Gordhan sees the alternative as even bleaker, warning Parliament’s Standing Committee on Public Accounts (SCOPA) against a liquidation “garage sale” of SAA assets:
“We are not having a garage sale I hope, where things are taken on the cheap so to speak. We don’t want people to just pick up assets, but to pay a fair price if or when a particular asset is put on sale.”
SAA Returns Three A330s
The Business Rescue team has been given until the end of the month to present a viable plan. Whatever the plan, it is unclear at this point if the government is willing to offer any more funding. Over the weekend, three leased SAA A330s were returned to the United States. Gordhan said this is part of SAA’s contining effort to reduce maintenance and leasing costs. It also foreshadows what could be a smaller, more regional airline if it manages to survive.
CONCLUSION
Gordhan has a long history in South African politics. Once imprisoned for anti-apartheid activity, Gordhan has served as finance minister and the head of tax collection. He’s well respected in South Africa, making all the more serious his decision to stake his reputation on saving South African Airways.
But Mkhuleko Hlengwa, the SCOPA chairman, warned that patience is growing thin:
“Taxpayers cannot afford to continuously pay for something whith no end in sight. We want a timeline so we can speak from certainty and not continue on speculation. The bottom like is either you shape up or you ship out. South Africans cannot afford an airline that will bleed it dry.”
Without outside involvement its a non starter the fact that the government wants to have some control / say in operations makes it even more difficult for any real investment group the government aka insiders ran SAA into the ground. Ethiopian Airlines which is government owned is the only fully functioning carrier in Africa.
Comair has been successful for decades. Perhaps they can take over/form the new SAA?
Even better; IAG/BA increase their ~12.5% stake, and new SAA joins oneworld.
Drawback: unions and global recession.
Actually, FOUR A330-200s were returned over the weekend.
ZS-SXW/SXX/SXY/SXZ all routed from JNB-GRU//GRU-TUS-MZJ. They are all on ground in Tuscon right now clearing customs.
Additionally, SXV was returned in March and SXU has been grounded since C-check last year, while the A330-300s (SXI/SXJ/SXK/SXL/SXM) have been parked since March.
Four! Wow. How many are left? Maybe a good acquisition opportunity for you? 😉
Perhaps if the SA government can recover what President Zuma and his cronies looted from the Treasury and all of the state companies like SAA or the electric group, things could be restored to a firmer footing. That said, reversing years of plundering the country’s wealth will take a herculean effort the current ANC leadership probably isn’t up to achieving.
Ironic that all these ministers (Gordhan included) are former members of the South African Communist Party and have positioned themselves as populist revolutionaries while plundering the country for decades….
It must be understood that Gordhan is a member of the SA Communist Party which is affiliated to the ANC. The real reason he wants to keep SAA going is for the jobs. Creating jobs for the apartheid victims has been the ANC’s major platform ever since coming to power; and quite rightly so. Unfortunately the ANC has used BEE to get their constituency – non-whites – jobs.
This policy has resulted in many square pegs in round holes in just about all government controlled organisations but it has not solved the problem of job creation; unemployment even before Covid-19 was at a record high.
The way to create jobs is to educate the people so that they have a commercial value to industry or can create their own wealth; this is the way the West works but is an anathema to a Communist mind.
The SA Communist Party views China as a shining example of centralised control and is keen to follow their example. Hence Gordhan’s insistence that government will keep some control over the “re-born” SAA. However SAA’s problems stem from appointing management that had no aviation experience but were good party members – a typical example of the Chinese way.
I believe that Gordhan is trapped in a Gordian Knot, sorry about the pun. Covid-19 has put paid to the aviation industry for the foreseeable future and our President – a successful businessman – will not allow anymore taxpayers’ money to be used to prop it up.