It looks like there’s no stopping public enterprises minister Pravin Gordhan’s determination to restart SAA.
We have written before criticising a plan that would suck up money from a Treasury that has put fiscal consolidation at the heart of its budgeting as SA grapples with a ballooning budget shortfall and rising national debt in the wake of the Covid-19 pandemic.
With creditors having endorsed the plan, and the Treasury seemingly on board — though there is still no clarity on the sourcing of R10.1bn needed to cover the immediate costs of getting the airline running again — SAA could well be back from a certain death, however ill-advised.
It’s worth analysing the latest statement from the minister, saying the government has stepped back from its position that a new airline that emerges should be majority state-owned. It is now looking at Telkom as a possible model for the airline.
The government owns 40% of Telkom, while the Public Investment Corporation, which is state-owned but has an independent board that invests public servants’ pensions, is the second-largest shareholder with more than 14%.
If the plan goes ahead, it would be one of the biggest ideological shifts in the ANC, which as recently as January reaffirmed that the government must own a controlling stake in the restructured or new SAA.
For the taxpaying public, who have coughed up billions of rand to keep an airline that has not delivered profits since 2011, it should be easier to accept an airline in which private investors have control of its strategic direction and can punish management for corporate blunders that have dogged SAA.
For finance minister Tito Mboweni, the lone voice in President Cyril Rampahosa’s executive team rightly not buying the idea of reviving SAA, it could mean one less state-owned company holding out a begging bowl for cash injections.
Since its listing and semi-privatisation two decades ago, Telkom has been by and large a profitable company, thanks in part to a strong management team and the prospect of getting its share price whacked by unforgiving investors. That is despite the company being forced to juggle demands from the government, unions and private investors.
Under CEO Sipho Maseko, Telkom has drawn up a coherent plan to reinvent itself from an entity built on fixed-line phone technology into a major modern telecommunications player. The company’s mobile-phone business, written off as doomed to fail when it launched a decade ago, is now firmly in the black and is the fastest-growing cellphone company in SA.
However, it is miles less profitable compared to bigger rivals MTN and Vodacom, underscoring a tough job for Maseko to balance the sometimes conflicting needs of the government and private investors.
On one hand, the government views Telkom as central to achieving its information technology policy goals, including increasing broadband access for millions of South Africans. On the other hand, Telkom must also show private investors a path to profitability for rolling out internet connectivity networks in areas where the prospect of getting returns on investments are slim.
In 2012, investors were annoyed by the government move to block a deal that many believed would have given it a perfect partner in South Korea’s KT Corporation, which was looking to buy a 20% stake.
The decision sent shares tumbling and robbed Telkom of a partner credited with turning South Korea into the world’s most wired country, with nearly every household having broadband internet connection.
The idea that Telkom is a strategic asset also means it should play a crucial role in creating jobs. That would explain why the company has the most bloated workforce in the industry despite its revenue being 70% and 52% lower than MTN and Vodacom, respectively.
Telkom employs just over 15,000 people and has annual revenues of R43bn, putting its employee per revenue ratio at R2.8m. That compares with a ratio of R7.3m and R11.7m for MTN and Vodacom.
Chances are the new, restructured SAA is still expected to walk the same tightrope. It’s not ideal, but at least there’s a potential to wean the airline off government bailouts.
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