The South African government was talking about years “not months” in considering an initial public offering (IPO) on South African Airways, Public Enterprises Minister Alec Erwin told parliamentarians on Tuesday.
Addressing the National Assembly’s public enterprises portfolio committee — chaired by African National Congress member of Parliament Yunus Carrim — the minister said that while the government supported in principle raising capital from the market, it did not wish to enter a long public debate at this time “whether we should do an IPO or not”.
An initial IPO is the first sale a corporation’s common shares to public investors. Erwin went out of his way to point out that the government did not wish to repeat the experience of Telkom where it lost control of the telephone company.
At the same time Erwin was emphatic that retaining SAA as a modern national carrier did not mean that government was ready to bail it out at the mere “knock at the door of the minister”. There would have to be compelling reasons for recapitalisation, for instance.
In terms of the South African Airways Bill currently before the committee, the intention of the government was that the entity would be a stand-alone enterprise reporting directly to the Minister of Public Enterprises. As a public company it would be able to access funding from the private sector easily.
Asked specifically what he meant by a national carrier, he said that if this meant the state would bail it out willy-nilly “then it is not a national carrier”. Referring to bailing out its hedge-book commitments, he said that this had been done because it would have had serious consequences for Transnet under which it fell.
“It will have to be exceptionally pressing circumstances for the state to put in capital,” he said.
Asked by a member of Parliament whether he would consider subsidising cargo — or even passenger service to widen accessibility to even the upper end of the working class — the Erwin said the government would not entertain this. “If you start subsidising actual passengers, more people come… the more you pay.”
“If you are in the midst of a global crisis, you are going to sink your economy very very fast. We would never subsidise any specific service. It is economically unsound and dangerous for the economy.”
Referring to the subsidisation of cargo, he said that this would put South Africa in trouble with the World Trade Organisation.
Erwin was candid about job losses following the restructuring of SAA. He said that while the general view of trade unions that private sector was less protective of workers than the state, nevertheless, “we know that we have to reduce the numbers [at SAA]”.
Negotiations with the unions would be carried out and mechanisms put in place “to cushion the blow”. ‒ I-Net Bridge