BRUCE WHITFIELD: It doesn’t have to break

I was standing toe-to-toe with Pravin Gordhan, then on one of his stints as Jacob Zuma’s finance minister. We were in the Kirchner Museum in Davos at a World Economic Forum gathering in 2015/2016 or thereabouts and I asked: “Why don’t you just give SAA away?” It was as clear as day that the government’s boardroom interference was the root cause of the airline’s financial distress.

Despite its shareholder and boardroom travesties, SAA delivered a solid, dependable customer experience — on time, safe and reasonably comfortable, but the shenanigans at the top made it unsustainable. Without regular bailouts it would have crashed and burnt long ago.

Gordhan stared me in the eye: “Over my dead body.”

He was unflinching in his steadfast belief that a developmental state required the government to be at the centre of economic life and there was simply no way that he could countenance the state selling assets into the private sector.

More than five years later, with Gordhan now directly responsible for the airline as part of his vast public enterprises portfolio, came the announcement that the government was willing to sell 51% of SAA to the Takatso Consortium for the princely sum of R51. Naturally I was concerned for the minister’s wellbeing, given his promise that the airline would have to be prized out of his cold, dead hands. But the minister was alive and well and giving a media briefing at the time, so that allayed that particular concern. The government would have to retain its not inconsiderable liabilities and the consortium undertook to take over funding the airline.

That’s R51 more than I had proposed, but by the time the deal was done and Covid had eviscerated the global airline industry, there was very little left of a once globally respected operator. Whether the Takatso deal is ever consummated remains to be seen. The government had to be pushed to the very brink before it made the logical decision to rid itself of a long-term liability. It is, however, reluctant to apply those lessons elsewhere.

SAA is a shadow of its former self — it appears to operate fewer than 10 aircraft on a limited schedule and on a tiny fraction of the routes it once flew. There are fewer than eight regular flights between OR Tambo and Cape Town, on what was once one of the busiest airline routes in the world. It has some Joburg- Durban frequencies, but its weekend domestic services have been cut to the bone. It flies between Joburg and Accra three times a week, and to Kinshasa, Harare, Lusaka and Mauritius on different days of the week.

We have also seen the collapse of SA Express, Mango, the British Airways franchise and kulula, and that has led to the expansion of Airlink and FlySafair and the emergence of Lift, a slowly emerging challenger brand. If SAA was properly run it would have cleaned up. Recent Airports Company SA statistics showed domestic travel was at 58% of December 2019 levels and regional and international flights at considerably lower levels.

Now Eskom is going the same way. Its ancient generation fleet is being held together with the engineering equivalent of plasters and chewing gum. Breakdowns are increasingly common and it’s incapable of providing enough energy to keep the lights on. Private sector players that can afford it are moving heaven and earth to generate as much of their own power as they can as quickly as they can, while wealthier households and private businesses have been insulating themselves in greater numbers through solar PV and battery solutions.

The crisis at most state-owned entities is not dissimilar. Once solid businesses have been mismanaged to the point of extinction and when offers to assist are made, they are either ignored or dismissed as opportunistic.

Former SA Post Office CEO Mark Barnes proposed to the government that he lead a consortium including unions to revitalise the service — he has had no official response other than a dismissal via a media report that he was seen to be taking a chance. He probably was, but talk to him and negotiate a better deal. Of course, he wants to buy an asset at the lowest possible price and turn it around for the benefit of shareholders, one of which would be the government, which would get the double benefit of seeing a functioning post office and, like it has out of Telkom for so long, harvesting dividends rather than simply bailing out failure.

Whitey Basson did it with OK Bazaars, when he paid R1 for the assets and assumed R200m in liabilities, and made it cash flow-positive for Shoprite within a year. One of Raymond Ackerman at Pick n Pay’s greater regrets in more than 50 years of supermarketing was that he missed that deal and taking the grocery battle to Shoprite rather than, as it transpired, it happening the other way round.

Until the government understands that it is the sole custodian of rapidly depreciating assets in a country that increasingly is regarded as a risky investment destination, the rot will continue to corrode whatever value is left in the entities entrusted to deliver services that increasingly are few and far between. Those with the means will courier their parcels, generate their own electricity and drill their own boreholes just as they have been providing their own security, medical care and education for their children for decades. Insurance companies will fill the potholes in the roads most of their customers use to limit car damage and private fire services will douse the flames in the suburbs where they have the greatest potential liability.

As for the rest, they will simply sit and suffer. At some point they will either switch allegiance to someone who can actually deliver on the better life they have been promised for 28 years, or they will, as is increasingly evident in crime statistics, take the law into their own hands, by which time the police, whose management is hardly showing itself to be focused on the big issues of law and order, may not be able to get the genie back in the bottle.