Turnaround SAA, build a thriving public aviation industry – the way forward
4 February 2020
The recent cancellation of flights by the South African Airways (SAA) is deeply worrying. Especially, it appears in the public arena without any indication of a comprehensive operational/commercial plan detailing strategic consolidation of routes and flights geared towards a turnaround. The Chief Commercial Officer, as well as the entire SAA board, management and business rescue practitioners should be held to account on this score and the turnaround in its entirety.
A comprehensive commercial plan covering the first quarter of 2020 and the whole year – located within a five-year medium-term strategic framework, and going forward on a long-range basis, must be produced to guide the turnaround of SAA. This is needed as a matter of urgency, to among others safeguard the post-commencement finance – the funds granted in the business rescue process to achieve the desired turnaround.
The post-commencement funds must be used prudently and accounted for up to the last cent. It is in this context that the SACP welcomed the investment announced last week by the Development Bank of Southern Africa (DBSA) into SAA’s turnaround. Other public Development Finance Institutions (DFIs), such as the Industrial Development Corporation (IDC), should follow suit. The working class, too, through its massive industrial and public sector funds, should also take responsibility, match words with deeds, invest in turning around SAA and other state-owned enterprises (SOEs), and ensure that they remain in public hands and serve the people effectively.
On the policy front, government must review the extent to which liberalisation of our aviation space and opening up of multiple airports of international arrivals and departures have impacted SAA negatively. Among the countries interested in fostering a thriving domestic aviation industry, there are those that allow only one or strictly regulated limited number of airports with international arrivals and departures. This is also an important aspect of national security. South Africa must change its ways by discarding the unbridled liberalisation, one of the major contributors to the crisis that SAA was flown into.
Government must review the entire neoliberal model of aviation policy changes that were anchored in the 1996 GEAR class project thinking. The review must lead to the adoption of an aviation regulatory framework that will enable publicly-owned airlines, namely SAA, SAA Cargo, SA Express and Mango, as well as SAA Technical, to thrive and play a central role in the success of the national aviation industry.
In addition to the much needed new aviation regulatory framework, government must adopt an aviation industrial policy focused on turning around, sustaining and growing SAA, SA Express, Mango, SAA Technical and Voyager. Where necessary and viable for a turnaround, consolidation should be considered, but after meaningful consultation. The rights of workers and employment must strictly be taken into account, protected and fostered. The chief aim of the aviation industrial policy must be to make the publicly-owned airline industry the mainstay of our aviation sector and tourism, with thriving domestic and international routes as well as aircraft maintenance capacity.
The aviation industrial policy requires the strengthening of aviation education, training and skills development, as well as support for aviation innovation, research and development (IRD). The aviation industry technical and professional capacity building and capabilities development will go a long way in turning around, sustaining and growing our publicly-owned aviation sector. In order to succeed, the publicly-owned airline industry needs multi-skilled artisans, technicians, engineers, other technical and professional capacities that are central in the development of aviation productive forces, good governance and effective management.
A comprehensive or whole-of-state strategic approach is required to achieve the turnaround and build a thriving publicly-owned aviation sector. For instance, Denel’s IRD of its attack helicopter, the AH-2 Rooivalk, should be extended to IRD for civilian use. The Council for Scientific and Industrial Research (CSIR) also has an important role to play in the required national aviation IRD strategy.
The publicly-owned aviation sector is crucially important for our national security as well. We must not allow South Africa to become yet another country where only the head of state has a dedicated aircraft without state-owned airlines for members of the public, other public representatives and officials – whose movement on tax payers’ money, both domestically and internationally, must be with one purpose, that is, to serve the people, the majority of whom is the working class. It is when one understands this point that they will appreciate why a publicly-owned airlines sector is strategic in the context of our state organisation.
It is also when one understands the national security aspects and political economy of the aviation industry, and has a grasp of the revenue available in the sector, that they will appreciate why it is strategic to have a publicly-owned capacity in a vast country such as ours.
The state in our country looked at in its entirety has the strategic advantage of being the single largest revenue market in our domestic aviation industry. This brings us to the next, crucially important point.
Government must leverage the state’s strategic advantages to pursue transformation towards the realisation of a democratic developmental state. The current situation calls for the state to strategically direct its flights budget and expenditure towards turning around and sustaining SAA, as well as SA Express and Mango. What this requires is that every person scheduled to take a flight on tax payers’ money should be directed to use the state-owned carriers. The state has the power to make regulations, including in particular on its expenditure, covering among others state-to-state co-operative procurement. It is important for government to lead by example, rather than to merely call on members of the public to use SAA. The government must walk the talk!
Related to the above, the state must take active steps to ensure that SAA, as well as SA Express and Mango, are affordable and sustainable. There are at least two strategic developmental imperatives in this regard.
Firstly, in no particularly order of implementation, a commercial plan with affordable aviation products for the working class, building connectivity between different cities and towns, will go a long way in contributing to the reduction of road fatalities structurally caused, among others, by the persisting apartheid spatial development legacy and migration patterns. During major holidays, for instance, workers use long distance road transportation in large numbers to their homes located far away from their places of work. There is a correlation between this, the state of roads infrastructure, its maintenance and a multiplicity of behaviours on the roads, on the one hand, and the road accidents that occur during these periods, on the other. It is certainly expected that there would be road fatalities during the upcoming Easter holidays, as it happened in all major holidays. A developmental state should use aviation development as part of its interventions to solve the problems of the transport industry.
Secondly, the impact of the laws and regulations, such as the preferential procurement policy framework and related codes, that do not place a legal onus on private companies to comply with their provisions but place a legal onus on public enterprises operating in the same sectors to comply with those provisions, has to be evaluated to foster a level playing field. The underlying principle for such compliance must be that it MUST bring about advantages, including competitive pricing, rather than disadvantages. Where disadvantages, including higher, exorbitant or inflated prices, arise, there must be exemption from compliance in the interest of the viability and sustainability of the affected public entities, such as SAA. All laws and regulations must be developmental, that is they must promote the viability and success of the publicly-owned economic sector, rather than result in disadvantages and destruction of the SOEs and other public entities.
What is also needed, as part of the desired turnaround, is to institute a thorough investigation into procurement conduct at SAA, and by extension also at SAA Technical, SA Express and Mango. The SACP therefore welcomes the Special Investigation Unit (SIU) proclamation authorised last week by President Cyril Ramaphosa into the affairs of SAA, including the contracting of Airbus aircrafts. The scope of the investigation should however be expanded.
The investigation should allow for other contracts entered into and tenders awarded by SAA, going back to the first post-1994 sale of SAA aircrafts, to be forensically scrutinised. These include but should not be limited to fuel, replacement parts, aircraft leasing contracts, other procurement and outsourced functions. Financial transactions and the extent to which outsourcing and procurement conduct contributed to the crisis into which SAA was plunged must be investigated holistically. This should cover but not limited to financial transactions and the relationship between SAA and SA Airlink.
The investigation must cover key executive appointments, including but not limited to the appointment of SAA Chief Restructuring Officer in 2017. It is important to remember the statement made by the Minister of Finance in Parliament, making the position of Chief Restructuring Officer a condition for government guarantees for SOEs. The failure of the Chief Restructuring Officer at SAA must not be left unattended. There must be accountability.
Appointments to be covered by the investigation, along with that of the Chief Restructuring Officer, should include the interim Chief Financial Officer, Chief Commercial Officer, and SAA Technical Chief Executive Officer, as well as the contracts SAA entered into under their stewardship. SAA was handed over into the hands of these ‘airline turnaround experts’, inclusive of several from abroad. The time any one of them spent abroad while appointed at SAA must also be investigated.
It is clear that the ‘airline turnaround experts’ have dismally failed, to the extent that SAA was plunged into further crisis under their captaincy. There must be accountability on the key performance outcomes that they failed to deliver, and the value for the money that they were paid while SAA continued to fall deeper into crisis, instead of achieving a turnaround. The investigation must also include possible conflict of interests, and all the boards being held to account.
South Africa is occupying a strategic area both in the region and the wider continent. It has a key role to play in regional, continental and overseas flights connectivity. It will be ridiculous to abandon regional routes and to not pursue African continental flights connectivity, while claiming to be committed to regional and continental integration. SAA and SA Express must be repositioned to play a key role in regional, continental and overseas flights connectivity. The SACP will oppose any attempts at destroying SAA, SA Express, SAA Technical, SA Cargo and Mango and conveying the role that they should play to private-profit-capture.
SAA Voyager must remain firmly part of SAA, of the publicly-owned aviation industry family. The SACP will oppose any attempts by the forces of private profiteering to capture it.
Furthermore, SAA has a lucrative land. That must remain firmly in the hands of SAA and used strategically to generate revenue for sustaining SAA for developmental purposes.
Alex Mohubetswane Mashilo, Central Committee Member: Head of Media & Communications, SACP.
This article first appeared in Umsebenzi Online.
