OUTA calls for SAA boycott if Government wastes more funding on airline

Government urged to reverse business rescue plan and instead liquidate SAA.

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30/10/2020 14:59:23

                                                                                                                                                                                                                    OUTA calls for SAA boycott if Government wastes more funding on airline

                                                                                                                                                                                                                    The Organisation Undoing Tax Abuse (OUTA), has called on businesses, individuals as well as the travel and tourism industry to boycott South African Airways (SAA), thereby sending a strong message to the government that South Africans will not tolerate further tax wastage and flawed plans to keep failing state owned enterprises (SOEs) afloat. 

                                                                                                                                                                                                                    This follows the allocation of another R10.5 billion to SAA in support of the relaunching of the failed state airline. “Since 2007, SAA has cost the taxpayer more than R72 billion in bailouts (R54bn in treasury grants and R19n in government guarantees).  This money could have been used instead to stimulate the economy by creating real and sustainable jobs through SMME’s, building and staffing more schools, clinics and law-enforcement entities, and addressing housing, water, sanitation and electricity needs to uplift our country’s people from the tentacles of poverty,” said Wayne Duvenage, CEO at OUTA.

                                                                                                                                                                                                                    OUTA raised concerns regarding the unjustified need for the state to waste more funds on SAA, and says the latest R10,5bn injection will not be the last. “We believe the current aviation industry climate and economic environment is the ideal time for the state to walk away and close down this once successful airline that was ruined through mismanagement and corruption.”  

                                                                                                                                                                                                                    The Minister of Public Enterprises, Pravin Gordhan, has explained the R10.5bn bailout as follows:

                                                                                                                                                                                                                    a) R2bn for operating start up costs for an airline with a staff of 1 000. 
                                                                                                                                                                                                                    b) R2.2bn retrenchment packages.
                                                                                                                                                                                                                    c) R800mil for post commencement creditors 
                                                                                                                                                                                                                    d) R3bn for unflown ticket liabilities
                                                                                                                                                                                                                    e) R1,7bn for aircraft lessors (6 month rental fees)
                                                                                                                                                                                                                    f) R600mil for concurrent creditors payment.

                                                                                                                                                                                                                    OUTA calculated that, aside from the above, approximately R16.4 billion is to be repaid over three years (mentioned in the 2020 Annual Budget to settle guaranteed debt over the next three years: R10.3bn in 2020/21, R4.3bn in 2021/22 and R1.8 bn in 2022/23). However, a further estimated R2.15 billion that is required for SAA’s subsidiaries (Mango, SAA Technical and Air Chefs) and an estimated R6.4 billion to cover the projected losses of the resurrected SAA over the first three years of operation (2021/22 to 2023/25), is not mentioned at all by government. 

                                                                                                                                                                                                                    “This means that the cost to rescue SAA will require another R8.5bn, taking the number to over R19bn (excluding the R16.4bn bond repayment figure). However, OUTA estimates the real cost of the rescue plan is somewhat higher and closer to R22bn, compared to government’s idea of R19bn, as our calculations show the airline will not be profitable in the first five years of operation.  IATA has revised aviation industry projections downwards, and new competitive forces have come into play which will undermine SAA’s local and regional growth plans. In our calculated opinion, more taxes will be wasted on future bailouts,” said Julius Kleynhans, Executive Manager for Public Governance at OUTA. 

                                                                                                                                                                                                                    OUTA believes that keeping unjustifiable SOE’s afloat is a waste of the state’s scarce resources and SAA is now nothing more than a vanity project. We want to emphasise the need to be mindful and cognizant of the employees who have been hard done-by through the state’s meddling and poor management of the airline. Accordingly,  their severance packages should be catered for more generously. Even if the liquidation costs increase to R20bn, this will still be cheaper than trying to get SAA flying again and brings certainty to taxpayers about a future that will require no more bailouts for the airline. 

                                                                                                                                                                                                                    “We call on government to reverse their decision on the Business Rescue Plan (BRP) before too much money is wasted on its relaunch, and to liquidate SAA, settle the debt and ensure that SAA staff get reasonable retrenchment packages,” Kleynhans added. 

                                                                                                                                                                                                                    OUTA warned that if government won’t come to its senses on this serious issue, civil society will call on the flying public, both locally and internationally, to use their buying power to bring this issue to a head. “The state must stop taking the public for granted and must realise that irrational decisions deserve and will attract public retaliation, just as Gauteng motorists did with the e-toll system. In the case of SAA, a rolling boycott will ultimately render it to the scrap-heap of poor economic policy decisions,” says Duvenage. 

                                                                                                                                                                                                                    Picture: Shutterstock

                                                                                                                                                                                                                    OUTA is a proudly South African civil action organisation, that is purely crowd funded. Our work is supported by ordinary citizens who are passionate about holding government accountable and ensuring our taxes are used to the benefit of all South Africans.