In his inaugural medium-term budget policy statement in 2021, finance minister Enoch Godongwana adopted what he called “a tough-love approach” to state-owned enterprises (SOEs), promising that they would no longer receive state bailouts. He revealed that the government had spent R290bn on SOEs since 2013, R38.4bn of which had gone to the “national carrier”, SAA. Pretoria would therefore have to “consolidate some of our SOEs and let go of those that are no longer considered strategically relevant”. That was almost exactly five years ago. Since then I am not aware of even a single SOE that has been “let go” by the government. Instead, in August Godongwana issued a R1bn guarantee to SAA to support the airline’s capital requirements. At the time I cautioned that we needed to guard against moving from one extreme, where the mantra was “bail out SOEs because the developmental state demands that”, to another where we do not fund or capitalise any SOE because of “tough love”. Instead, we had to assess the situation of each SOE individually and respond accordingly. When it came out of business rescue in April 2021 SAA had zero debt, with R2.5bn in working capital. While the airline reported a profit of R162m last year, in reality it had experienced an R1bn operating loss, according to aviation analyst Guy Leitch. In the past two months SAA has staggered salary payments to its employees, indicating that the airline has ― at the very least ― a cashflow problem. Some reports have gone as far as to suggest the airline is not a going concern, an allegation that has been dismissed by SAA. I have previously spelt out, based on my doctoral study of the airline and its Kenyan and Ethiopian counterparts, that a state-owned SAA subject to the Public Finance Management Act (PFMA) was not a viable proposition. It will not succeed commercially for as long as it is wholly state-owned. What SAA desperately needs to become a viable airline again is not just a strategic equity partnership but majority ownership by a private sector player. That way, should the government want it to continue as a “flag carrier” it could retain a minority stake. That is simple logic in the cut-throat aviation industry. Many formerly state-owned airlines have gone that route across the world. Even such historic brands as British Airways, Air France-KLM and Lufthansa are no longer fully owned by their respective governments ― they have long since been privatised ― and Britain, France, Holland and Germany are much wealthier than South Africa. The same thing happened here in Africa in 1996 when the Kenyan government listed Kenya Airways on the stock exchange but retained equity in it. The most successful African airline, Ethiopian Airlines , is an aberration in this regard, only because the Ethiopian government adopted a hands-off approach from inception, apart from providing start-up capital, and left its board to run the airline as though it were privately owned. It is a great pity that after three years of promising talks, in the end the Takatso deal, which would have seen Harith General Partners owning 51% of the airline, collapsed because agreement could not be reached on SAA’s value. That deal, which would have precipitated a legal amendment regarding the airline’s ownership, could have breathed life into a comatose SAA. I am sure I was not alone in hoping for the consummation of that deal. Now Harith is in bed with FlySafair , SAA’s most formidable competitor, which has cornered the domestic and regional market. That is likely to compound the national carrier’s challenges even further, following the huge injection of capital into FlySafair from Harith at a time when SAA is hobbling along. If there was ever an asset the government should let go of, it is SAA, which is already a bit-part player in the domestic market. The department of transport must amend the legislation that restricts foreign ownership of the national carrier to 20% and up to 49% for local ownership. Th
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