EDITORIAL: Jarana’s plea shows SA is out of options
We need to recognise that the government cannot run an airline. We must recognise that a far better option is to let the private sector try to do it
The departure of SAA CEO Vuyani Jarana, so soon after the resignation of his counterpart at Eskom, points to something systemic, and obvious: the current model of state-owned enterprises (SOEs) does not work. It hasn’t been working for a while.
Jarana’s bold resignation letter last week spelt it out. "It is impossible to succeed in the turnaround with the current level of bureaucracy we have to go through," he says. For an entity "in ICU" as Jarana put it, this is critical.
"Lines of accountability are becoming increasingly blurred … [and] trust levels are very low."
Rather than implement the turnaround with vigour, Jarana said, the government has dawdled, increasing the debt. "The strategy is being systematically undermined … a lot has to change to enable the accelerated implementation of the [turnaround]."
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There is, unavoidably, the issue of funding for SAA. With little cash in the National Treasury, and a minister of finance — Tito Mboweni — who rightly sees SAA as a money-sucking black hole, you can understand Jarana’s frustration at not having any certainty about funding.
"We have had no less than three incidents in which the company was almost unable to pay salaries," he said, gloomily.
The problem is, nobody actually believes that if you give SAA further funding now, it’ll somehow muscle its way to a position where it is self-sustaining. And nobody believes it precisely because we’ve all heard the promises before — what would be different this time?
Rather, all that new funding will do is swaddle the airline in enough cash to avoid making hard decisions for a few months, until it hits the wall again — hard decisions particularly about SAA’s staff that are likely to see the ANC bump heads with its trade union partners.
But this time, we need to grasp the nettle. We need to recognise that the government cannot run an airline. We must recognise that a far better option is to let the private sector try to do it.
You can, of course, understand why some ANC factions don’t like this. Philosophically, it sits better with them to have a government that controls the companies providing critical services, like providing electricity to the country and air transport for the public, or running the airports.
But there’s no margin left to indulge ill-placed romanticism. The terrifying 3.2% fall in GDP, annualised, in the first quarter, was, in part, the consequence of load-shedding at Eskom — an institution reaping the whirlwind of more than a decade of failing to act when it should have.
Since 1994, no fewer than 11 airline companies have come and gone, many succumbing to the unfair competition created by the state subsidy for SAA. By contrast, Comair, through kulula and the British Airways franchise, has endured, clocking up a profit for 71 consecutive years.
But because skilled employees have options, SAA became the training ground for other operators. It bled talent as if from a gushing wound — including at the technical division, SAA Technical.
Jarana is only one of many professionals who now want to try their luck elsewhere, having tried to turn SAA into a sustainable business. The only constant has been the shareholder. Since 1934 the government, any of our governments, has tried to make SAA into a self-sustainable business. For 85 years, it failed.
In the past 20 years alone, the government has thrown more than R55bn at SAA — with the same result. You can replace "SAA" with "Eskom", "PetroSA", "Denel" or any of the SOEs: the model has simply failed.
Now the Treasury is empty and growth has fallen off a cliff precisely because of this strategy of kicking the can down the road. Reading Jarana’s resignation letter leaves you with a sense of despair, partly because it seems there are so few options left to fix the airline. There is in reality only one option: to make the tough call.