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There has been absolute transparency in the SAA transition and all the necessary legal processes are being complied with, as efforts continue to help the airline recover from the damage wreaked by state capture, writes Jacky Molisane.
“People regurgitate the same old clichés and it becomes like a photocopy of a photocopy of something that’s vaguely interesting,” said Steve Coogan, an English actor, farceur, writer, and impressionist.
Welcome to the “illusory truth effect,” a glitch in the human psyche that equates regurgitation with the truth, courtesy of people who refuse to acknowledge that South African Airways (SAA) is doing well after the business rescue process which was implemented to ensure the country retains many aviation skills and expertise.
Psychologists say the illusory truth effect is the tendency to believe false information to be correct after repeated exposure.
Guy Leitch’s opinion piece The new SAA seems little more than a flight of fantasy, is an illusory truth effect to distract South Africans from the fact that for the airline to remain relevant and competitive, there is a need to finalise the regulatory imperatives, finalise the takeover by the Takatso Consortium, and accelerate and align its strategy with current macro-economic and market conditions.
Financial transparency and strategic planning
Leitch‘s claim that the government is hiding details regarding SAA’s finances is an unfair accusation. The government is actively working towards improving the financial stability of SAA by implementing cost-cutting measures, streamlining operations, and exploring new revenue streams.
Strategic planning involves continuous adjustments to budget projections and targets in response to the changing global economic landscape and the dynamic aviation industry. By emphasising financial transparency and adapting to market conditions, the government demonstrates its commitment to SAA’s long-term sustainability.
Indeed, Minister of Public Enterprises Pravin Gordhan did mention that SAA as an airline is projected to make a profit. However, SAA Group, consisting of SAA, Airchefs, SAA Technical is expected to make a loss.
Takatso consortium partnership
The department has never doubted the finalisation of the takeover by the Takatso Consortium or raised any scepticism about the deal.
We have always been consistent with the objectives of the strategic equity partnership:
- To relaunch a viable, scalable, agile and sustainable national South African airline that is no longer dependent on the South African fiscus.
- SAA will be a substantial operating business in its own right. The Consortium’s platform, intellectual property, experience, expertise and substantial balance sheet will be leveraged to build a world-class airline;
- To evaluate and explore the revival and re-establishment of partnerships with African and International airlines and networks, to fully access the growing African aviation market and for SAA to once again become the leading airline on the African continent;
- To build a model public-private partnership that leverages the commercial skills of the Consortium, build on the brand name and positive image of SAA, which together will serve the national interests of South Africa;
- To build an airline that propels the growth of the South African economy, especially the tourism industry;
- To build a strong, uniquely South African culture in the airline that showcases the country’s broad skills, talent, and diversity;
- A longer-term, strategic objective is to create a listed vehicle/Initial Public Offering (IPO) for the airline in which all South Africans will have the opportunity to participate in its success. This strategy is supported by existing, successful precedents of broad participation by South Africans in listed national assets; and
- Develop a high-performance culture, befitting of a world-class airline to which SAA aspires to return.
It is the DPE’s wish that that the regulatory approval process by the Competition Commission didn’t take this long to conclude. However, we await the process, which is outside of our hands.
The department is confident that once the conclusion of the regulatory process is finalised, SAA will be in a much better financial position as the consortium R3 billion investment in SAA will propel it to recapture its market share.
While Leitch questions the viability of the Takatso Consortium takeover, he fails to recognise the potential benefits of such a partnership. The consortium brings private sector expertise and experience in airline management, which can significantly contribute to the restructuring and modernisation of SAA.
Moreover, the consortium’s capital injection will bolster the airline’s financial stability and enable it to expand its operations in the future. The government’s collaboration with the strategic equity partner is a strategic move that showcases its commitment to SAA’s success.
Regulatory compliance
Leitch’s assertion that the government is ignoring regulatory requirements is misleading.
In reality, the government is working closely with relevant regulatory authorities to address each requirement in a timely and efficient manner. This includes repealing the South African Airways Act, obtaining necessary licences, and gaining approval for changes in management and ownership.
Navigating these regulatory hurdles is a complex process that requires patience and coordination among different stakeholders.
Fleet modernisation and market share recovery
The writer criticises SAA’s fleet as outdated and suggests that the airline has lost significant market share. However, it is essential to acknowledge that the government, in collaboration with the Takatso Consortium, will be actively pursuing fleet modernisation by acquiring or leasing newer, more fuel-efficient aircraft, once the Takatso Consortium has been approved to take over the 51% shareholding in SAA.
Furthermore, SAA is exploring strategic partnerships with other airlines to expand its route network and strengthen its market position. As the aviation industry recovers from the Covid-19 pandemic, SAA has the potential to regain its market share and provide better services to its customers.
Comprehensive SOE reforms and ERRP commitments
The business rescue process of SAA should be understood in a broader context of the government’s state-owned enterprises (SOEs) restructuring and reform programme and the commitments made under the Economic Recovery and Reconstruction Plan (ERRP).
The ERRP initiatives focus on improving the performance of SOEs, including SAA, by enhancing governance, financial management, and operational efficiency. The ERRP also emphasises job creation, infrastructure investment, and economic growth, which will ultimately benefit the aviation sector.
Importance of aviation for the country
As a society we need to acknowledge the vital role the aviation sector plays in South Africa’s economic growth, job creation, regional integration, and global connectivity.
The government’s involvement in the aviation industry is crucial for fostering these benefits. This includes investing in infrastructure development, promoting tourism, ensuring national security, and creating effective policies and regulations for the industry.
The government’s ongoing efforts to revitalise SAA are an integral part of supporting the aviation sector’s overall growth and development in South Africa.
The airline has developed a medium- to long-term strategy which is in no doubt growing its market share locally and globally.
The priorities around SAA are: to ensure the successful conclusion of the business rescue process and strategic equity process; the injection of working capital by the SEP; and the consolidation of the state’s preference shares and its “golden share”.
So far we are making progress with the implementation of the business rescue plan and turnaround strategy with various route and frequency changes having been implemented and a number of cost savings initiatives.
SAA and future profitability
So what is required for SAA to become more and more profitable?
- Ethical underpinnings coupled with unwavering consistency in the application of those principles to provide a social foundation for the company’s growth;
- Effective leadership who enthusiastically embrace the evolving requirements of the airline;
- A knowledgeable and supportive board composed of a variety of members who have different backgrounds and levels of business savvy;
- Executives with integrity and are honest with themselves and the board to ensure that the right people with the right skills are in the right place;
- A middle management refocusing their time and energy on strategic challenges and employees with knowledge and skills to relieve executives of operational responsibilities;
- Commitment to the execution an implementation of upcoming strategies, leveraging the country’s competencies and venturing into new markets and developing new products to secure the long term sustainability of the airline.
There has been absolute transparency in the SAA transition and all the necessary legal processes are being complied with, notwithstanding regrettable efforts by many to sabotage or undermine what is an important project in terms of recovering an SOE from the damage that was caused by state capture.
Jacky Molisane is acting director-general of the Department of Public Enterprises. News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.
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