The Competition Tribunal this week announced it approved Takatso Aviation’s proposed acquisition of a 51% stake in South African Airways, signifying the overcoming of a huge hurdle in the reform of the airline.
SAA went into business rescue in December 2019, and the long, difficult process has produced several lessons. Its revival should provide insights on how state-owned enterprises can be reformed.
The principle of the sale of a 51% stake in SAA is significant as it is the first case under the Cyril Ramaphosa administration in which the private sector gets to play a role in SOEs.
At the time SAA went into business rescue, the “Telkom model” seemed an attractive option, in which the airline would, like Telkom, be listed on the JSE.
Listing has many benefits, not limited to the ability to raise capital — it entails greater scrutiny and accountability to shareholders. The Telkom model would mean the exemption of the airline from the Public Finance Management Act (PFMA). Many SOE executives have highlighted the PFMA as a hindrance, while globally agile competitors moved with speed.
Selling the idea of strategic equity partners in SOEs in ANC circles is tough, as many see it as ideologically unacceptable. Some see it as palming off public assets to “white monopoly capital” or people connected to politicians.
The SAA deal is not entirely without problems, despite passing the competition hurdle. There are questions about the evaluation of assets. The business will probably continue, the questions notwithstanding.
Meanwhile, the Post Office is taking the same route: business rescue.
The government struggles to accept the concept of shutting down failed businesses. Business rescue is then chosen as a last resort, when a stakeholder, perhaps a labour union or creditor, calls for the company to be liquidated.
Politicians will then label the entity as “strategic” and too damaging to shut down or liquidate, even though the shareholder is not in a position to recapitalise it.
It is hard to see how anyone in this day and age could see the Post Office as a strategic entity.
Its competitors have long snapped up the opportunities in the market. Even if the government were to argue that the Post Office provides far-flung rural areas mail and banking access (in the case of social grants), that will remain a burden the government cannot finance.
As the SABC prepares to report yet another loss — around R1bn — some see business rescue as the ideal route.
I am not convinced that an institution like the SABC is a candidate for business rescue, considering there are grey areas about rescuing a public entity. In an election season, it would be untenable to have the SABC in such choppy waters under rescue.
In a way, business rescue of SOEs probably serves as a useful decoy for the ANC to elide difficult conversations about the best route to bring in the private sector.
Meanwhile, Transnet is moving ahead, seeking private players to take over the running of its Durban-to-Johannesburg rail corridor for the next 20 years.
The rescue or reform initiatives aren’t big enough to help anyone deconstruct a genuine or legitimate narrative about how the ANC wants to reform the economy. In energy, reforms such as private sector generation have to be rammed down the throats of reluctant ministers and bureaucrats after pressure from the private sector and the public.
While reform does not have many effective proponents, the demand for public resources is ever growing.
Defence minister Thandi Modise often warns the public that the army is not adequately resourced to handle domestic interventions.
So, the odd case of a rescued entity represents a collapse more than a well thought out plan for industry reform.
It would be hard for the ANC government to reform any industry because it lacks a coherent ideological position on the economy. Even rescued companies are likely to struggle in the future as there is no long-term vision about the assets or the industry in which they operate.
Instead of reform, we may see further state collapse and more SOEs requiring recapitalisation.
* Mkokeli is lead partner at public affairs consultancy Mkokeli Advisory
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