Gordhan takes aim at SAA, squashes privatisation talks

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Minister of Finance Pravin Gordhan has set his sights on growing embattled State owned airline South African Airways (SAA).

Speaking during his Budget Speech in Parliament, the Minister emphasised the importance of ensuring an effective turn around for the airline.

In 2014, Minister in the Presidency, Jeff Radebe, announced that SAA will fall under National Treasury and not the Department of Public Enterprises.

Gordhan says to get the airline working optimally – the first point of call would be to make sure that the boardroom drama that has plagued the airline is resolved. “There are proposals that have been made, in respect of a new board for SAA, we are hoping in the next few weeks we will complete deliberations on that, take it to Cabinet and the new board will be in place. Because having a new board is essential for the rest of the processes to kick in,” says the Minister.

Gordhan also made mention of plans to grow the airline stating that he has agreed with Minister of Public Enterprises Lynne Brown to explore the possible merger of SAA and SA Express, under a strengthened board, with a view to engaging with a potential minority equity partner, and to create a bigger and more operationally efficient airline.

In the 2016 Budget review document, Treasury notes that SAA will report a net loss in 2014/15 as a result of high operating costs, increased competition on all routes, asset impairments and higher finance costs.

As part of a broader turnaround strategy, steps have been taken to reduce aircraft leasing costs, cease operations on some unprofitable routes and achieve procurement savings. It will be some years, however, before SAA can become a sustainable, standalone carrier.

In the period ahead, government will seek opportunities to enter into strategic partnerships that allow SAA to draw on private sector capital and technical expertise to improve its performance and expand its network.

When speaking of other State-Owned Enterprises (SOES), Gordhan emphasized that privatisation is not on the cards, Saying they have important roles to play in boosting growth and development. But there are issues to address in their governance, mandates, financing and operations.

“The recently-released report of the Presidential Review Commission on State-Owned Enterprises is a very welcome guide to the path ahead. It rightly emphasises that effective leadership is central to progress. It notes that our infrastructure financing requirements are huge, and require effective co-funding arrangements between SOEs and other investors,” says Gordhan.

The asset base of State owned entities is over R1 trillion, equivalent to about 27% of GDP. They maintain networks and provide services; power, roads, transport, water, communications, on which the rest of the economy depends.

Click below for the full speech:

– By Luvuyo Mdeni