The suspension and the lifting of the suspension of South African Express has led to renewed calls for privatisation. The fact that SA Express was granted a precautionary suspension so that it complies with the necessary aviation regulations was the perfect opportunity for the privatisation evangelists to play to the gallery.
The call for privatisation occurs when they know that the Minister of Finance during his budget speech said that South African Airways and SA Express will be merged into one entity. Privatisation is not a panacea to inefficiencies, the solution is governance and management. SAA and SA Express in order to succeed in their mandate need to have a strong management team and an effective and efficient board that has total shareholder support, and that is competent in aviation.
If privatisation guaranteed success, then private companies would never fail because they have the profit motive. So I hope the privatisation evangelists can tell us what happened to private companies such as Enron, Saambou Bank, African Bank, and a plethora of airlines such as Velvet Sky, Sun Air, Skywise, 1Time, and Interlink Airline.
In a paper titled “What Washington Means by Policy Reform” John Williamson noted that: “The main rationale for privatisation is the belief that private industry is managed more efficiently than state enterprises, because of the more direct incentives faced by a manager who either has a direct personal stake in the profits of an enterprise or else is accountable to those who do…My own view is that privatisation can be very constructive where it results in increased competition, and useful where it eases fiscal pressures, but I am not persuaded that public services is always inferior to private acquisitiveness as a motivating force.”
The writings of Williamson would be immortalised as the Washington Consensus. South Africa’s own GEAR policy is a neo-liberal macroeconomic policy that is in line with the Washington Consensus prescribes. Post 1994, South Africa did engage in some privatisation of state resources. The classical example is that Iscor was sold to the Mittal family and this led to the company applying import parity pricing which meant they priced their steel locally at international prices, hurting the South African economy.
The experience of South Africa with privatisation has been painful, and hence the government has applied its mind carefully, fully understanding that privatisation is not a panacea, privatisation is the easiest means for asset transfer to the elitist class of society. Williamson in a paper titled “Did the Washington Consensus Fail?” noted that: “We have since been made very conscious that it matters a lot more how privatisation is done; it can be a highly corrupt process that transfers assets to a privileged elite for a fraction of their true value, but the evidence is that it brings benefits when done property.”
Telkom was one of the first SOEs to lead to partial privatisation through granting a private placement of shares to Black South African through BEE shareholding and this culminated in the listing of Telkom on the Johannesburg Stock Exchange. Telkom is also a classical example of an SOE that was in deep trouble, until the South African government appointed a strong board, supported by good management. To disprove the hegemonic untruth that privatisation is a panacea for government inefficiencies, the share price of Telkom has been one of the best performing for the past five years on the Johannesburg Stock Exchange. The success of Telkom is due to the fact that the Minister of Communication appointed strong men to lead Telkom in the form of Jabu Mabuza, who was formerly at Tsogo Sun and is a respected businessman.
The World Bank has increasingly paid more attention to institutions as a prerequisite for economic growth. The existence of strong institutions is not an end in itself, the strong institutions must be fed with strong men. Governance and management must be the focus to ensure that South African Express remains a robust business, not privatisation. I have reflected on the advice of John Williamson and I hope this will benefit the national discourse around state owned enterprises because the dominant hegemony is that SOEs in the aviation space must be privatised.
Did anyone for one moment they reflect that the very same SAA and SA Express provide public transportation as they are funded by taxpayers? Very soon the privatisation evangelists will preach that the Gautrain must be privatised, forgetting its part of the public transport system.