SAA to get R5bn injection amid renewed calls for privatisation

File: Another bailout is on the cards for South African Airways as announced by Finance Minister, Tito Mboweni.


JOHANNESBURG – An economist recommended government privatise South African Airways (SAA) after the embattled national carrier was promised a R5-billion cash injection to aid its turnaround strategy.

Economist Azar Jammine said the airline, which has received R20-billion in guarantees up to date, has not generated a profit since 2011.

READ: Ailing SAA to appear before Scopa to give annual report

“There are other solutions to solve the problems at SAA. Many people for many years have been saying that SAA should be privatised, or at least get a partial privatisation. In other words, a partner from outside, to take some share in the company and who might inject some capital into the company, but in return for accountability and good governance.

"But the idea of a partial privatisation is being opposed on ideological grounds by many people within the ANC, and so the only solution is for government to keep pouring more and more money in,” said Jammine.

He said the cash injection will have serious implications for the economy and create negative a sentiment among investors and rating agencies.

READ: Why keep on bailing out SAA? asks Maimane

“Ratings agencies are taking this very seriously and are clearly perturbed at the possibility that government&39;s own debt will need to increase substantially, in order to help bail out state-owned enterprises.

"We are starting with SAA; the really big one is Eskom. At the end of the day taxpayers are having to fork out more and more to finance the inefficiencies of state-owned enterprises,” said Jammine.

In the financial stability report released recently by the South African Reserve Bank, one red flagged raised was the constant reliance of state-owned enterprises on the government for bailouts.

Treasury said it would wait for the cabinet to approve the bailout. The outcome is expected to be finalised in time for the medium-term budget speech in October.