Treasury's bail out of SAX will not solve underlying problem 

23 February 2015

I have today written to the Chairperson of the Portfolio Committee on Public Enterprises, Dipuo Letsatsi-Duba, requesting that she urgently call on South African Express (SAX) and National Treasury to table, before Parliament, the terms and value of the latest bail-out awarded to SAX.

It is inconceivable that we are witnessing further money being ploughed into a badly-run State-Owned Enterprise (SOE) just days before the Minister of Finance is to deliver a budget where he will inevitably ask for more belt-tightening from South African's.

The DA is concerned that this bailout comes at a time when SAX has yet to table financial results for the 2013-2014 year, after it failed to convince auditors that it was a going concern.

It is reported that the bailout came with "stringent conditions" but until these are made public this claim cannot be independently corroborated. Parliament must be allowed to interrogate these conditions to ensure that the South African public are not being short-changed by rewarding yet another inefficient parastatal with a bailout.

The government cannot continue to simply throw money at the problems that are devastating SOE's. If SAX is not a going concern, cannot finance its daily operations off its balance sheet, or breaches loan covenants on lease agreements, then surely its business model must be reviewed.

SAX should focus on the following in order to save money and not use Treasury as its safety net:

Re-evaluating routes and cut all those which are not immediately profitable,

Renegotiating contracts with technical suppliers such as Lufthansa, and

Moving its own offices at OR Tambo Airport to SAA offices to cut rental costs by about 50%.

CEO of SAX, Inati Ntshanga, has stated that the airline is working on "internal austerity measures" to bring the airline to "sustainable profitability", while at the same time going cap in hand to national treasury for a bailout of an undisclosed amount.

It is high-time that SAX is run like a business. If an owner can no longer afford to sustain a business, he would look at various options to mitigate this, failing which the business would finally be sold off. 

The government and the nation can longer afford to sustain SAX. SAX should invest their time, energy and resources in identifying alternatives to cut expenditure prior to approaching National Treasury for yet another bailout. If this fails, the unbundling of the South African Airline Holding Company and the partial or wholesale privatisation thereof seems to be the only viable option.

Statement issued by Natasha Michael MP, DA Shadow Minister Public Enterprises, February 23 2015

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