Further financial aid to South African Airways (SAA) and South African Express (SA Express) from the private banking sector is not justified according to the Free Market Foundation (FMF).
“It may be legal, but is it moral and ethical to continue to use shareholder funds to prop up a failing apartheid dinosaur which subsidises the rich to fly at the expense of the poor,” FMF said.
The South African think tank released this statement following a declaration by Banking Council chair, Cas Coovadia, that banks were willing to answer Public Enterprise minister, Pravin Gordhan’s appeal for financial assistance for failing state-owned enterprises (SOEs).
“Local and international banks have been complicit in allowing SOEs to continue their mismanagement, looting and wasteful expenditure by constantly extending loans to corrupt and technically bankrupt SOEs,” the statement read. “Of course the banks are, well, laughing all the way to the bank. It is a risk-free business at likely higher than normal interest rates, so what if SAA defaults on its debt.”
Total loans and bonds extended by South Africa’s biggest banks to struggling SOEs amounted to R54.6 billion by end September 2017 according to central bank data.
The FMF pointed out that the banks had previously stated, during SA Express’s presentation to Parliament’s Portfolio Committee on Public Enterprises, that they would no longer commit to supporting the airline without a clear turnaround plan. This made FMF question banks’ sudden preparation to absorb SA Express debt into their loans for SAA and called the proposed merger between the loss-making SAA and SA Express a “marriage made in hell brokered by SA banks”.
SAA is currently looking for R21.7 billion from government to support its latest turnaround plan, excluding the purchase of new planes which FMF said was essential if the national airline was to remain competitive in the international aviation market.
“CEO Vuyani Jarana called this a ‘catch 22’ situation,” said an FMF spokesperson. “This fact alone renders any further state financial aid irrelevant and irresponsible.”
