Tag: SAA

SAA bail-outs could have bought Emirates

South Africa would have achieved a lot if it were not for its continuous bailout of state entities and state capture‚ CEO of Business Leadership SA Bonang Mohale has said.

“We have spent R50 billion on SAA since 1999. If we had not done that‚ we would have bought Emirates Airlines. We would have in 23 years at least had four CEO’s that are being head-hunted for being effective and efficient knowing how to run an award-winning airline‚” said Mohale.

He was speaking at a panel discussion on Tuesday titled ‘South Africa – Hero to Zero’‚ based on the role of business in the country’s current political climate.

Mohale said South Africans had a lot to think about and consider ahead of the ANC’s elective conference to be held later this year.

“Post December 20‚ I think we will be confronted with two challenges. The first will be a fiscal cliff where this government will run out of money at the rate that we are bailing out state-owned enterprises. Secondly‚ I think that most of us are beginning to think about an emergency economy recovery plan‚” he said.

“There is [agreement] about what we need to stop doing‚ what we need to start and continue to ensure that by the end of 2018 we would have added another 2.3 percentage point to our GDP growth because it’s about economic growth and if the economy is not growing‚ very soon we will be talking about the redistribution of poverty and not the redistribution of wealth.”

Fellow panel member former British MP Lord Peter Hain also highlighted that a lot of South Africa’s funds were not working in the country’s favour.

At one point‚ South Africa’s democratic government was spending more on education than any other developing nation but sadly‚ it was not reaping the rewards.

“School attendance doubled since the dark days of apartheid‚ yet out of 140 countries in the 2015-16 World Economic Forum’s global competitiveness index‚ South Africa was ranked at 138 for the quality of its education‚ below desperately poor‚ undeveloped states like Burundi‚ Benin and Mauritania. This is not just appalling‚ it is criminal‚” he said‚ adding that this showed problems in South Africa’s systems.

On a more positive note‚ he said the country’s problems were not unique and a bumpy road following the transition from apartheid to democracy had been expected.

“Just look at Britain today‚ the so-called mother of democracy. We are a mess with a dysfunctional prime minister‚ a divided government‚ a weak economy‚” Hain said‚ adding that Brexit was one of the biggest historical challenges the country has faced since World War II.

By Naledi Shange for Rand Daily Mail

Government may sell stake in Telkom to fund SAA

The revelation on Wednesday that finance minister Malusi Gigaba is considering selling a big chunk or possibly even all of government’s 39.3% in Telkom, at face value, is fantastic news.

There is absolutely no reason for government to continue to hold onto a significant stake in the telecommunications operator — if there ever was one, which is debatable.

On paper, now is the right time to sell the company. Under the leadership of CEO Sipho Maseko and chairman Jabu Mabuza, the company’s fortunes look better now than they have in many years.

President Zuma’s disastrous eight years in office mean the chickens are coming home to roost
The problem with selling distressed assets is they go for a song, raising almost nothing for the fiscus. Telkom is no longer a distressed asset — in fact, it is in such a strong position that it is taking the fight to its big mobile rivals, winning market share and giving them a serious headache. Consumers are loving it. Maseko’s praises should be sung from the hilltops.

It’s the wrong time to privatise state-owned assets when they are in trouble. It’s far better to turn them around, and then hive them off, ensuring the private investors that are brought in contribute meaningfully to the fiscus, in the process hopefully avoiding tax increases or even allowing for tax relief. South Africa desperately needs a well-managed programme of privatisation.

Black hole

The possible sale of Telkom — revealed in a secret cabinet document leaked to the Democratic Alliance — is being considered to raise money to throw into the black hole that is the national airline, South African Airways.

(That the DA was given this document is testimony to the fact that the ANC is a house divided. Secret documents are being leaked to the opposition, providing insight into the shambolic state of the ruling party. But that’s another story.)

So, Gigaba has a R10bn-plus hole to plug at the floundering SAA, which has been mismanaged for years under the watch of chairwoman Dudu Myeni, a close friend of President Jacob Zuma.

The concern is government is selling a good asset — using good money — to prop up an airline that should have been privatised years ago (and, of course, that shouldn’t have been allowed to be driven into the ground in the first place by incompetent managers).

But there’s a bigger issue here. Gigaba, facing a crisis over SAA, appears to be caught like a deer in the headlights, unsure about what to do. This is symptomatic of a finance minister out of his depth and, worse, a government that is failing.

Government already chased away Korea’s KT Corp, sending a terrible message to foreign investors that the country is not open for business.

If Gigaba simply starts selling government’s Telkom shares on the open market, it could prove disastrous for the telecoms operator’s shareholders. Not properly managed, the company’s share price could be decimated as the state dumps its holding.

Far better would be to sell the stake to someone through a managed process, led by advisers. But sell it to who?

Government already chased away Korea’s KT Corp, sending a terrible message to foreign investors that the country is not open for business. If there are potential foreign buyers, now is the time to ask them to step forward. But is this government prepared to sell the stake to a foreign company? Remember, it was the ANC government that almost scuppered Vodafone’s acquisition of Telkom’s stake in Vodacom, sending the rand tumbling at the time. Sanity, thankfully, eventually prevailed.

Local buyer?

Who locally could buy the stake? That’s far from clear. It’s unlikely the Competition Commission would permit one of Telkom’s big rivals to buy it. It’s not in consumers’ interests for that to happen as it would concentrate the market into the hands of three players.

But Gigaba, desperate for money to prop up an airline that has been ruined by his government, faces having his hand forced. The last thing he wants to — or should — do is to expand the budget deficit even further than it’s already stretched to bail out a bankrupt airline. He needs money from somewhere. Are there other options? Maybe. Government’s already sold a chunk of its stake in Vodacom to fund another state-owned disaster, Eskom. The Public Investment Corp, which invests public servants’ pension money, bought that stake. Maybe it will be asked to get involved again.

Whatever he decides to do, Gigaba can’t be rash about it. President Zuma’s disastrous eight years in office mean the chickens are coming home to roost. And the finance minister is in the unenviable position of having to try and fix some of the mess. The wrong decisions now could make things even worse.

By Duncan McLeod for TechCentral 

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