The national carrier SAA emerged from three years under business rescue in April last year, thanks to a R10.4 billion bailout. However, it is still grappling with the effects of a turbulent history marked by financial distress, operational problems and allegations of mismanagement. (Delwyn Verasamy/M&G)
The 9/11 terror attacks wreaked havoc on the global aviation industry. Airlines were forced to increase security as panic-stricken travellers steered clear of airports, prompting the worst financial crisis in the industry’s history at that point.
Among the airlines that fell victim to the devastation was SwissAir, which was already in a precarious financial position because of a McKinsey-endorsed expansion strategy. In October 2001, the airline — which began before World War II — filed for bankruptcy.
SwissAir’s unravelling was felt in many corners of the industry, including in South Africa which saw the government’s first effort to partially privatise SAA fall apart.
In 1999, Switzerland’s national carrier bought a 20% stake in SAA for R1.4 billion. The government’s privatisation programme had seemingly been met with renewed fervour that year following Jeff Radebe’s appointment as public enterprises minister. The government had already started disposing of its shares in Telkom, which it would eventually list on the JSE.
But SwissAir’s collapse put a wrench in the state’s SAA privatisation plans when it was forced to buy back its 20% stake. That wrench only came unstuck two decades later, when another crisis gave the government’s long-shelved privatisation plans new wind.
While another deal to privatise SAA has recently fallen apart, there is a strong chance we won’t have to wait another 20 years before a new arrangement is announced. This comes as many of the barriers to privatisation have seemingly been cut down during Cyril Ramaphosa’s presidency.
The government has received considerable criticism for its handling of the deal to sell its majority stake in SAA to the Takatso Consortium. Public Enterprises Minister Pravin Gordhan announced that the sale was during a late afternoon media briefing earlier in March.
Some were perturbed by the government missing out on its opportunity to privatise the airline, which has long been a drain on public resources.
For example, in an article for the Daily Friend — the online publication by the Institute of Race Relations — Jonathan Katzenellenbogen wrote: “Cosatu and the SACP [South African Communist Party] are putting a brake on reform at a time when the state desperately needs private sector expertise and finance to turn around failing state enterprises … And within the ANC and the communist party, there appears to be a deep reluctance to see the ‘commanding heights’ of the economy in private hands.”
Katzenellenbogen later accused the governing party of doggedly hanging on to “collapsing state enterprises and forcing the economy to pay for their failure”.
Ramaphosa’s statements on the matter suggest that, despite the apparent ideological differences within the ANC and the broader alliance, the government is prepared to push ahead with its efforts to reform state-owned entities.
After Gordhan’s announcement, the president told the Sunday Times that the government remains committed to securing strategic partners for beleaguered parastatals.
“There is still an intention, more broadly speaking, to have strategic partners to work together with government in the process of turning around struggling and ailing SOEs,” Ramaphosa said, clarifying that a sudden wholesale sell-off of state assets is still not on the cards.
It is true that the government has seen resistance from the SACP and trade union federation Cosatu over SAA’s privatisation, perhaps more so from the former than the latter.
After the Takatso deal’s collapse, the SACP criticised Gordhan’s department for its “agenda to insinuate private commercial interests and competition in public enterprises”.
Cosatu’s response was less condemning, noting the government’s achievements in reviving SAA since the pandemic. In 2019, the federation has reportedly said that although it opposes privatisation in strategic sectors of the economy, such as electricity, water and passenger rail, it would consider an equity partner for SAA — on the condition that the government retains its majority stake in the airline.
Despite resistance from the ruling party’s alliance members, the government has made considerable progress towards bringing the private sector into the fold in recent years. Its efforts have extended to Transnet and Eskom, both seen as being subjected to back-door privatisation through unbundling.
Indeed, recent wins for “team privatisation” include the appointment of a board to Eskom’s unbundled transmission company and Transnet’s recently-finalised partnership with the Philippines-based International Container Terminal Services. Meanwhile, the treasury has imposed strict conditions on both entities, putting pressure on them to comply with reforms.
For its part, SAA seems to believe that partial privatisation is still an option. The airline’s chief executive, John Lamola, recently told the Financial Times that the best scenario is for it to follow Telkom’s example and list on the JSE.
All this to say that you’d be mistaken to believe that the collapse of the flawed SAA deal is game ending for the privatisation agenda, which has made a stunning comeback and has shown few signs of giving up.