Why I support the privatisation of South African Airways.
South African Airways is a well-known Airline in the African continent, even globally but the airline has been struggling for some years now. The last time SAA made a profit was in 2011 and has been receiving government bail-out of R57 Billion since 1994. In December 2019, the government announced that SAA would enter bankruptcy protection because the airline made an R16 billion loss over three years. On the 11 of June 2021, the Minister of public enterprises Pravin Gordhan announced the government is selling 51% of the Airline so far the preferred partner is Takatso Consortium.
Why Privatisation is best for SAA?
1. The government has failed.
Truth be told, the government has failed, the government has failed to rescue the airline. The government has failed to manage SAA and decrease its debt. Irregular expenditure, inefficient running of the airline, structural issues, and corruption within the airline are what killed the state-owned enterprise. For the past decade, SAA has continuously received bailouts from the government to keep the airline floating and alive. A step needed to be taken, it was either to shut down the airline and privatise it. The best option was to privatise it, the option that can still create revenue for the state.
2. The financial outlook of SAA now.
With 51% privatised implies the airline will be profit-driven as it will be run by private board members and CEO. There is hope for a turnaround of the airline as we can see in the case of Telkom when it was privatised, we saw a fortune turnaround at Telkom. The private equity partner will invest just over R3 billion and bring to the table a more profitable way of running SAA.
3. The revenue the government will receive.
The government will still receive income from SAA as it still owns 49% of the airline. This means the government still has a stake in the future profits of the airline adding that the airline will not receive any more money from the government. Taxpayer’s money is safe and it will be spent on more significant areas than SAA.
Economists have welcomed the move by the government forecasting a turnaround for the airline as this comes with a profit-driven structure and will be run for profit. How long was the government going to bail out SAA? What best option than to admit that you have failed and it’s time to pass ownership to somebody with a revenue-making mentality. It was high time. Yes, the state has lost a huge stake in SAA but for the greater good. Would you continue pouring more money into an unprofitable company knowing the losses it makes? The best option was to privatise and still retain a percentage of SAA.
