CLAUDE DE BAISSAC: The sad assassination of an iconic airline

I woke up with mixed feelings on Wednesday to the news of the collapse of the SAA “privatisation” deal. Saddened, because unless a miracle pops up an iconic airline with a storied past and — once upon a time — a pivotal function in the national and regional transport system is now gasping for its final breath. And responsibility for this sits squarely on the lap of this and previous ANC governments.

Hence the frustration, because the ignominious death of SAA wasn’t an economic necessity as there was, is and will continue to be, a market for a strong domestic and international airline. The death of SAA is, undoubtedly, a form of economic assassination.

The good news though is that thanks to the dogged entrepreneurial spirit of South Africans and that other countries actually know how to run airlines, this stopped mattering a long time ago. The country has long moved on from SAA in the same way it is now moving on from Eskom.

Which leads to my sense of vindication. I denounced public enterprises minister Pravin Gordhan’s strategy regarding state-owned enterprises (SOEs) five years ago in this newspaper, with particular emphasis on SAA. (“Pravin Gordhan is getting it dangerously wrong with SOEs”, December 3 2019.)

I wrote that Gordhan “remains attached to a model of public ownership that is unfounded in economics, profoundly non-performing, can only lead to vast corruption, and is ruinous to the Treasury and country. Faced with the systemic failure of the majority of SOEs, he is unwilling, and perhaps unable, to truly reckon with the causes and consequences of the terminal crisis he is now tasked with solving. The bare-knuckled truth is that he is failing, at grave cost to SA.”

On SAA, I had this to say: “There is no evidence that SAA is developmental. It does not provide a strategic service to the country that others cannot provide better and cheaper. It does not alleviate poverty, and on balance probably does the opposite. Its contribution to jobs is inefficient and most likely negative.

“Letting SAA go, in an orderly fashion through an urgent downsizing, disposal of its non-performing divisions and privatisation of its performing ones, would release scarce resources the government could allocate to more urgent tasks, including improving the situation at Eskom, a far more serious and urgent emergency also created by the state.”

It would be easy to rush to the minister’s defence and argue that he did just what I recommended by seeking to privatise SAA and that I am firing a misguided and gratuitous broadside at an unwelcome moment, given that Gordhan recently announced his retirement. That we should commiserate over the failure of one last enlightened attempt to save a worthy flag carrier.

But such defence is undeserved. After two decades of worst practice in SOE governance, this was worst-practice privatisation. No competitive tendering. No public disclosure. No accountability. No recourse to a demonstrably experienced, competent, financially robust strategic partner. This was Gordhan’s own little pet privatisation, at everyone’s cost but his.

The Takatso consortium popped out of nowhere, and the dealings went on, and on, and on. Until their predictable collapse. This wasn’t privatisation but state ownership by stealth, self-dealing benefiting the few at the expense, yet again, of the many. If it wasn’t technically corrupt, it was so in the political economy sense: an elite that keeps destroying the crown jewels through cushy jobs, preferential suppliers contracts, free seats and champagne glasses, and then sells these to itself at a huge discount rate. If that is privatisation, I far prefer state ownership, thank you very much. At least a semblance of accountability comes with that ...

The failure of the SAA deal is also immensely ironic. It shows the extent of the ineptitude of those  who now demand that South Africans return them to power after the sterling performances of the Zuma and Ramaphosa administrations. Indeed, they seemed not to have learnt that self-selected privatisation requires the things they have destroyed so gleefully: capital, expertise, skills and willing consumers.

The ANC elite’s irrepressible march to catastrophe shows it up again and again as too arrogant to know its own ignorance. Gordhan was once held in high regard for his integrity and competence. Now we know it was simply an optical illusion. What some of his colleagues have done by omission and carelessness, he — like a few other supposed luminaries in government — did by commission. This is as unforgivable as it was unavoidable.

Now, will this government, a matter of a few weeks before the most critical election in the nation’s democratic era, let SAA die as the minister promised? There are labour union jobs at stake. Cosatu’s “election war room” might finally have something to war about. I expect the storied airline’s legacy to be further stained by at least few more months of zombie status.

Beyond SAA — which stopped mattering from an economic standpoint a long time ago but whose fiscal ghosts will continue to haunt the country for some time — the fundamental question is whether the next government will be similarly committed to zero growth through the negative multiplier of statism à la South Africaine (spend more, deliver less).

Whether it will double down through policies such as prescribed investments, expropriation without compensation, National Health Insurance, nationalisation of the Reserve Bank and the similar kind of economic radicalisation that has done so much good to the peoples of Cuba, Venezuela and Zimbabwe.

Or whether it will finally let the astounding creativity and resilience of this incredibly patient nation work its miracle, the state focusing its depleted resources on efficient policing, functioning public education, humane state-owned hospitals and drivable roads. We shall know very soon.

• De Baissac is CEO of global and country risk advisory firm Eunomix.