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DA welcomes labour court ruling on NUM and SACCA application

The Democratic Alliance (DA) welcomes the Labour Court ruling which rejects the application made by the National Union of Metalworkers (NUM) and the South African Cabin Crew Association (SACCA), to stop the South African Airways (SAA) Business Rescue Practitioners, Les Matuson and Siviwe Dongwana, from retrenching staff.

There is general consensus that SAA is overstaffed by at least 30% and with passengers abandoning SAA in droves, the overstaffing is probably much, much higher. There is absolutely no way that SAA can be rescued, if at all, without massive staff retrenchments.

The unions behaviour does not indicate their care of the welfare of workers, otherwise they would allow the SAA business rescue process to continue to save the airline. It was absurd for NUM and SACCA to have been under the impression that taxpayer bailouts would continue to be used to pour money into SAA to pay the bloated staff compliment.

The unions and Minister of Public Enterprises, Pravin Gordhan, must now remove themselves from this process and allow the SAA business rescue practitioners to continue with their work unhindered.

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SAA Business Rescue Practitioner, Les Matuson, should engage Parliament in his consultations

Now that the business rescue process for South African Airways (SAA) is underway and Les Matuson, the SAA Business Rescue Practitioner, has been appointed and is reported to be intending to meet with all stakeholders within the next 10 days – it is essential that Parliament’s Standing Committee on Public Accounts (SCOPA) be part of the proposed meeting with stakeholders.

As such, the DA has written to Mkhuleko Hlengwa, the SCOPA Chairperson, to request that he immediately write to Les Matuson to insist that SCOPA be included in the proposed meeting with SAA stakeholders.

This consultation process with all SAA stakeholders is clearly vital if Matuson is going to stand any chance of succeeding in the rescue of the bankrupt SAA.

Not only is SAA the property of all South Africans but on top of this over the past 25 years the South African taxpayer has been extorted by successive ANC governments to bailout SAA to the tune of R57 billion.

The SAA board of directors has refused to publish and submit to Parliament the Annual Financial Statements for SAA, as required by law, for the past two financial years and this has made it impossible for Parliament to perform its constitutional duty of oversight over SAA which is insolvent and a massive financial drain on the South African taxpayer.

In a display of the disdain in which the SAA board appears to hold Parliament, the SAA board declined to attend a SCOPA meeting on 27 November 2019. In a last ditch attempt to ensure that SAA account to Parliament and immediately submit its annual financial statements as required by the Public Finance Management Act, SCOPA had determined that on 5 December 2019 the committee would travel to the SAA Head Office in its massive luxury premises at Jet Park to meet the SAA board. This meeting was postponed when President Cyril Ramaphosa announced that airline would be put into voluntary business rescue.

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Government must be realistic of its role throughout SAA Business Rescue

Now that the process of putting South African Airways (SAA) into Business Rescue has finally been put into motion by President Cyril Ramaphosa and the SAA board, it is critical that once Business Rescue is awarded that the outcome is one that removes all liability for SAA from the Government and the South African taxpayer.

There can be no equivocation on the part of government in ensuring that if SAA survives it must be as a private enterprise.

The financial status of SAA and its subsidiaries is largely unknown given that Annual Financial Statements for the past two financial years have not been published by the SAA board. This makes it impossible for a clear understanding of what the financial status of the different parts of the SAA Group, such as Mango are. Despite this delinquency on the part of the SAA board it seems clear that there are some parts of the SAA Group that are possibly profitable and have potential, whilst there are other parts that must be shut down forthwith.

Clearly it is highly unlikely that there will be a buyer who will be willing to purchase SAA and its subsidiaries as a whole, thus an unbundling of the SAA group, the sale of parts with potential and shutdown of those parts that have no future is required. The following is a possible strategy to be adopted:

  • Mango separated from the SAA Group and offered for sale preferably by way of a public offer and listing.
  • Mango to take over SAA domestic routes which are profitable.
  • Remaining SAA with international routes to be offered for sale.
  • SA Express to be shut down and Mango to take over profitable domestic routes if any exist.
  • Air Chefs Catering to be shutdown.
  • SAA Technical, given the levels of fraud and corruption, to be shutdown.

The DA will be writing to the Business Rescue Practitioner once appointed to request that we discuss the DA proposals with her/him.

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It’s time for National Government to consider partial or full privatisation of SAA

The time has come for National Government to seriously consider South African Airways’ (SAA) future as unions have now threatened to extend their industrial action to include the entire aviation industry. If these intentions materialize, Government will sit with an even bigger problem on its hands than SAA losing an estimated R52 million per day, as it can potentially put our entire already ailing economy under further distress.

The Democratic Alliance (DA) is of the strong and considered view that the airline be placed under business rescue, in order to mitigate any further loss of revenue and to ensure that the entity is a going concern. If not business rescue, the only viable option would be the partial or full privatisation of this entity.

NUMSA and its affiliates are out of touch with the genuine concerns of the workers they represent and do not care about the sorry state of our economy.

Bringing the entire aviation industry to a standstill will have devastating consequences on the tourism sector in particular. This time of the year, tourists flock to the country bringing much-needed capital and economic activity. Furthermore, reports indicate that unions are demanding an 8% wage increase from the cash-strapped SAA. If the airline cannot even afford to fund its daily operations, how can NUMSA ever expect SAA to afford an 8% wage increase?

Unions enjoy far too much power; their proximity to the governing party has allowed them to hold the country to ransom while inflicting an insurmountable amount of damage on the economy. South Africa will have difficulty  recovering from this kind of damage to the economy.”

SAA has become an albatross on our economy and South Africans derive very little benefit from this entity. The time has come for National Government to put its pride aside, do the right thing and begin the process of privatising the entity without delay.

SAA is in desperate need for reform and the only way to ensure positive reform is for National Government to take a stand against unions and making the tough decisions without fear or favour.

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SAA being held to ransom by unions

The Democratic Alliance (DA) notes that South African Airways (SAA) has grounded all its domestic and international flights for the next few days, following threats of industrial action from unions. The South African Cabin Crew Association and National Union of Metal Workers have stated that they will initiate a strike following SAA’s revelation that it may have to retrench workers as part of its turnaround strategy. SAA is playing into the hands of opportunistic unions as they continue to hold the national carrier to ransom.

The defunct and cash-strapped SAA will undoubtedly remain on a collision course if its leadership structures allow unions to drive the entity deeper into the ground with these actions. Furthermore, by bowing to industrial threats, SAA loses all trust from consumers who make this carrier their airline of choice. Even more harrowing is the fact that certain foreign states will not allow SAA to continue flying into their airspaces if it displays continued degrees of uncertain viability.

Efforts by new SAA management and directors to turn around the fraught state-owned entity (SOE) have not amounted to anything. Reports today indicate that the SOE will be losing over R50 million per day due to the catastrophic decision to ground its flights in anticipation of this strike action. This loss in revenue is compounded by the fact that the airline is already technically insolvent, without sufficient capital to fund its daily operations. It is currently operational solely due to continued state handouts, much like Eskom. The DA thus reiterates its calls for Minister of Public Enterprises, Pravin Gordhan, to place SAA under business rescue and to immediately shutdown SA Express.

Furthermore, by placing SAA under business rescue, the entity will be somewhat able to mitigate the extensive impact of its planned job cuts, as announced earlier this week. As it stands, SAA plans to cut 944 jobs, which translates to almost a fifth of its workforce in order to bring its runaway costs under control.

The airline has been a massive financial drain on the fiscus and the only solution beyond business rescue would be the partial or full privatisation of the SOE. This would prevent SAA from having any further negative impact on South Africa’s economy. These decisions must be accompanied by strict reforms which will also prevent unions from holding the airline, and to an extent, South Africa’s economy, to ransom.

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BOKAMOSO | Time for some “Ramarealism”

This newsletter is the third in a four-part series that seeks to debunk the well-meaning but dangerous idea that Ramaphosa is the “knight in shining armour” come to save SA.

In the first newsletter, I debunked the idea that Ramaphosa needs a “bigger mandate” from the public. In the second, I poked holes in the notion that a strong ANC will protect us from the EFF. In this third newsletter I seek to explain why confidence in Ramaphosa is based on hope rather than evidence, and that “Ramarealism” will serve us better than “Ramaphoria”. In the fourth, I will set out why the DA is the party to vote for in 2019.

After 25 years of ANC hegemony, South Africa finds itself on a distinctly negative trajectory. Every single metric of social wellbeing is moving in the wrong direction: unemployment, poverty and inequality are going up, as are crime rates, the cost of living, and the chances of load-shedding. Desperate for hope, many people are looking to a single individual, Cyril Ramaphosa, to fix South Africa.

Ultimately, job-creating economic growth is the only show in town. Nothing else will solve South Africa’s problems. Yet it is extremely unlikely that Ramaphosa will get our economy growing and creating jobs.

Why? Because Ramaphosa is fundamentally an ANC man.

Firstly, he is committed to the ANC’s failed ideology of state-led development. This is evident in his determination to keep pouring billions of taxpayer rands into the bottomless pit that is SAA.

And it is evident in the legislation going through Parliament under Ramaphosa’s watch: expropriation without compensation, the one-size-fits-all national minimum wage, the Competition Amendment Bill, the Basic Education Laws Amendment Bill, the National Health Insurance Bill.

This legislation does not solve the core problems at the heart of all service delivery failure in South Africa, it makes them worse.

Secondly, Ramaphosa is deeply embedded in and committed to the ANC’s cosy relationship with big labour and big business that underpins our insider/outsider economy – in which those with jobs are protected and the 9.8 million without jobs stand very little chance of finding one. He fully endorses the ANC system that enriches a connected elite at the expense of the excluded poor. Indeed, his estimated net worth of R6.4 billion – including 31 properties – depended on it.

Thus the most decisive outcome of his jobs summit was the moratorium on public sector retrenchments.

Unions are the ANC’s core support base, so the deep reforms required for the economy to grow – privatising SOEs, cutting the public wage bill, liberalising labour legislation, fixing basic education – will remain strictly off limits and investors will continue to go elsewhere.

“But at least we’ll have stability” is the standard Ramaphorian reply to this argument. Really? Our disillusioned young army of 9.8 million jobless will soon grow to 10 million and more. Stability is not going to be a word in our lexicon until we break free from the ANC’s insider/outsider paradigm that sustains this abnormally high unemployment rate.

The DA has a plan to do just that. It centres on freeing our economy and leveling the playing field for new entrants, be they entrepreneurs, young people, or the unemployed. We will grow small business opportunities by removing blockage and red-tape, including exempting them from restrictive labour legislation.

We will do what Ramaphosa cannot and will not: privatise SOE’s, cut the public sector wage bill and appoint on merit. This will free up resources to invest in the infrastructure required to enable economic growth and it will create the conditions for a far more inclusive economy.

Ramaphosa knows these are the reforms to fix South Africa. But he will never go that route because his focus is on fixing the ANC. The big Ramaphoria hope is that he will do this by tackling the corruption that infects the ANC and its governments. Yet the evidence is that even in this endeavor, he will fail.

Despite much lip service, there has still not been a single arrest of any person involved in the capture and looting of Eskom and Transnet, or their handlers inside the ANC. The NPA are letting the Guptas get away with the Estina Dairy scandal. And Ramaphosa is still making the public pay for Zuma’s defence costs, despite it being within his power to cancel this irrational deal now.

Ramaphosa’s track record in fighting corruption is abysmal. He was not only Deputy President and Head of Government Business from 2014-2017, but also headed the ANC’s deployment committee during the worst years of state capture, from 2012 to 2017.

He oversaw the appointments of Brian Molefe, Matshela Koko and Ben Ngubane to steer Eskom, amongst others. So either he played a key role in state capture, or else he is extraordinarily incompetent. Neither fits in with the “corruption-buster” theory. (And his excuse that he “didn’t know how bad it was” makes him either dishonest or incompetent.) But optimists argue he was just biding his time and playing the “long game”.

Then there is the matter of a R500 000 payment by Bosasa CEO Gavin Watson into a fund for Ramaphosa’s election campaign, and the fishy business relationship between Bosasa and Ramaphosa’s son, Andile.

The evidence tells us that this election is not about how best to save the ANC. It is about how best to save South Africa from the ANC. That’s why voters should resist the lure of Ramaphoria, and support the only party building one South Africa for all – the DA.

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Tito Mboweni should take on the wreckers and nutters in the governing party in SA

  1. Introduction

The new Minister of Finance, Tito Mboweni, delivered his “maiden” medium-term budget policy statement four weeks ago in Parliament.

The metrics were bad and took the markets by surprise, and as a result, the rand tanked and bond yields spiked.

But there were elements of the medium-term budget policy statement that were courageous.

To his credit, the minister took on the wreckers inside the governing party, warning them not to attack the mandate and independence of the reserve bank.

Which is exactly what the wreckers inside the governing party needed to be told as they force us closer to the brink.

  1. Economic Trouble

We are in deep economic trouble and the minister was absolutely right when he warned that we are at a crossroads.

We have a growth problem, with an average economic growth rate of 2% expected over the medium term between 2019/20 and 2021/22.

We have a revenue problem, with a revenue shortfall of R57 billion expected over the medium term between 2019/20 and 2021/22.

We have an expenditure problem, with an expenditure overrun of R23 billion over the medium term between 2019/20 and 2021/22.

We have a state-owned enterprises problem, with zombie state-owned enterprises requiring billions of rands in bailouts between 2019/20 and 2021/22.

We have a deficit problem, with our fiscal deficit expected to blow out to R251 billion, or 4% of GDP, by 2021/22.

We have a debt problem, with our national debt expected to reach a staggering R3.7 trillion, or 59% of GDP, by 2021/22.

And we remain a small open economy with “twin deficits” making us vulnerable to external shocks.

  1. Debt Ceiling

Which is why we welcome the minister’s announcement that it is now time to consider a new “fiscal anchor”.

The aim of fiscal policy has been to stabilize national debt, which has been a spectacular failure given the fact that national debt will increase from R627 billion, or 26% of GDP, in 2008/09, to a staggering R3.7 trillion, or 59% of GDP, in 2021/22.

What this means is that we will be spending a staggering R247 billion on debt service costs in 2021/22, which is the equivalent of what we will spend on basic education this year, in 2018/19.

We think the solution is a statutory fiscal rule and we are in the advanced stages of preparing a Private Members Bill, called the Fiscal Responsibility Bill, which will make provision for a “debt ceiling”.

  1. Wreckers

We cannot go on like this and we hope that the minister will not allow himself to be muzzled and will continues to take on the wreckers inside the governing party.

He started off well by:

  • by saying that zombie state-owned enterprises like South African Airways should be shut down; and
  • by saying that those who support land expropriation without compensation are ill informed.

Which, of course, was greeted with horror by the wreckers inside the governing party, because they still reminisce fondly about the good of days of Check Point Charlie and Aeroflot.

The minister needs to take on:

  • Jeremy Cronin, who is still shackled to the idea of a Soviet-style central state planning commission and who thinks the National Development Plan consists of “some useful insights and recommendations, intriguing but untested proposals, summaries of programmes long under way, and much else”.

He needs to take on

  • Rob Davies, who is still shackled to the idea of a Soviet-style smokestack economy with workers toiling around blast furnaces happily singing “Arise ye workers” as they deliver a perfect rendition of the “The Internationale”.

The minister needs to take on:

  • Ebrahim Patel, who is busy weaponizing the competition commission to stamp out monopolies in the private sector, while doing everything in his power to protect monopolies in the public sector, including desperately clinging on to the biggest monopoly in the country, Eskom.

Of course, there is one wrecker the minister does not have to take on and that is Yunus Carrim, because he is a “Communist of a Special Type”.

He fights the struggle of the working class, not from the factory floor, or from the plains of Outer Mongolia as he often claims, but from the lobbies of the most lavish hotels in Washington.

And that is because his best kept secret is … wait for it … that despite being a leading member of the Communist Party, he serves as a board member on the parliamentary network of …wait for it … the World Bank and the International Monetary Fund.

  1. Nutters

Oh, and the minister should not forget Nomvule Mokonyane, who is more of a nutter than a wrecker, and who thinks that we can just “pick up the rand”.

  1. Conclusion

In the end, we welcome the fact that the minister:

  • has decided to remain on Twitter; and
  • has decided to be more careful on Twitter.

We know he has had a bad start, but things will get better and we look forward to debating the best ideas to take us forward in South Africa.

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Tito Mboweni’s “mini-budget” reveals a full-scale budget blowout

The Minister of Finance, Tito Mboweni’s, “maiden” medium-term budget policy statement reveals a full-scale budget blowout, which is clear evidence that the “new path” of economic growth, employment and transformation has failed in South Africa.

The medium-term budget policy statement reveals a full-scale budget blowout, with stagnant economic growth (2%), lower-than-expected revenue (R85 billion), higher-than-expected expenditure (R12 billion) and “bail-outs” of state-owned enterprises (R9 billion), including a R5 billion “bailout” of zombie state-owned airline, South African Airways.

The fact is that, compared to Main Budget 2018, there will be significant “fiscal slippage”, with:

  • the fiscal deficit increasing by R22 billion in 2018/19, R33 billion in 2019/20 and R41 billion in 2020/21;
  • national debt increasing by R19 billion in 2018/19, R55 billion in 2019/210 and R103 billion in 2020/21; and
  • the national debt will now only stabilise two years later at 56.5% of GDP in 2025/26.

What this means is that debt service costs will skyrocket to a staggering R247 billion in 2021/22, which is R148 billion more than we will spend on police, R55 billion more than we will spend on social grants, and is equal to what we will spend on basic education this year, 2018/19, in South Africa.

Which is why ordinary people, who are battling to make ends meet, and who are battling to put bread on the table, are likely to be hit by further tax increases over the medium-term, to effectively “bail-out” the governing party, who have mismanaged the economy for more than a decade in South Africa.

We have an expenditure problem and must now implement a Comprehensive Spending Review aimed at reducing national debt and debt service costs, over the medium term between 2019/20 and 2021/22.

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Selling off assets won’t save SAA

The Democratic Alliance (DA) is unsurprised by media reports today that South African Airways (SAA) is contemplating selling off assets as a result of the mounting debt the airline faces.

The reports further indicate that SAA will lose R6 billion in the  2018/19 financial year meaning that SAA will lose R822 million more than the already massive loss of more than R 5 billion projected in the SAA Corporate Plan.

In the latest corporate plan, SAA is set to receive government bailouts to the tune of R13 billion over the next two years, however, the additional losses will mean that the taxpayer will have to cough up more, at least R14 billion in total.

The DA has for the last three years maintained that SAA has been and is bankrupt and that the airline cannot trade its way out of debt.

Despite the government guarantees of R19,1 billion that are available to SAA, commercial banks are apparently unwilling to lend more to SAA.

The “new” board and executives of SAA are unable to implement a robust plan to cut the bloated costs, root out rampant corruption and grow sales and on top of this meet debt servicing and repayment obligations.

Last month, the Ministers of Finance and Public Enterprises issued a joint announcement that SAA will be transferred to Public Enterprises. This move, as the DA warned, has not made a difference to the fortunes of SAA.

Now more than ever before there is clearly a need to:

  • Put SAA into business rescue;
  • Appoint a business rescue practitioner who has experience in the airline industry and who will make the hard financial decisions to stop the losses;
  • Allow SAA to recover under business rescue and be privatised, failing which to let SAA go to the wall and be liquidated.

The state of SAA and other state-owned enterprises must be placed squarely at the feet of the failing ANC. Under their watch, state entities have disintegrated because of corruption and gross mismanagement. The DA, through Parliament, will do all we can to rescue these entities from further ruin.

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SAA will still need billions of rand in bailouts

The joint announcement by Ministers of Finance and Public Enterprises that South African Airways has been transferred to Public Enterprises comes as no surprise but in itself makes not an iota of difference to the fortunes of SAA.

Changing the department that is responsible for SAA will not make the airline profitable. SAA will still require taxpayer bailouts of R 5,45 billion in 2018, R 5,18 billion in 2019 and R 1,93 billion in 2020 to fund the ongoing SAA losses that the turn-around strategy includes. These losses exclude the losses from the bankrupt SA Xpress that simply add to the demands on taxpayers for bailouts of the state-owned aviation “liabilities”

The announcement by the Ministers of Finance and Public Enterprises makes reference to a study done to develop the optimal group structure for state-owned aviation assets. This study must be made public and I have written to the Minister of Finance to request a copy of this study.