Tuesday, October 9, 2012

As SA’s colours rise with SAA, so do the losses

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09 Oct 2012 | Tony Leon | Original Publication: BDlive
SAA may not just be a drag on growth but may also contribute to the widening of the current account deficit, writes Tony Leon

IN 1960, in the first ever televised US presidential debate, Richard Nixon showed up with five o’clock shadow and looked shifty compared with the uber-cool John F Kennedy; in 1988, George Bush looked at his watch during his encounter with Bill Clinton; in 2000, Al Gore sighed audibly in his TV duel against Bush’s son, George. All three went on to lose the presidential election a month or so later. On such twitches of body language the hinges of a nation, and the world’s sole, albeit declining, hyper-power would appear to turn.

Last Wednesday, in his first debate with challenger Mitt Romney, President Barack Obama posted a "subprime" performance. He looked peevish and was widely accused of being defensive and, in place of his fluid eloquence of four years before, of showing up with a grimace and "looking as though he would be rather anywhere else".

But if a different Obama showed up in Denver, so did a different Romney.

Gone was the right-wing Tea Party-appeasing hardliner. In his place was the Massachusetts moderate. It is entirely in the realm of conjecture as to which Romney will present himself in the event that he comes from behind and beats Obama next month.

When Romney was debating Ted Kennedy in their contest for the US Senate in 1994, the liberal senator killed Romney’s chances with a memorable put-down. At that time — a position he has reversed several times subsequently — on the issue of abortion, Romney proclaimed himself "prochoice". "No you’re not," snapped Kennedy, "as with everything, you’re multiple choice."

Obama never brought to the debate any of the sound and fury of his barrage of negative advertising against Romney, which portrays the Republican as a vampire capitalist job-destroyer from his time as the founder of Bain Capital, the private equity firm that netted Romney a fortune of about $250m.

There is a direct connection between Bain Capital and the continuing misfortunes of South African Airways (SAA). One of Romney’s closest associates and a co-founder of Bain Capital is the notorious Coleman Andrews, who between 1998 and 2001, pocketed R232m from the grateful and unsuspecting South African taxpayer for 20 months’ work as SAA CEO. Now, 11 years and four CEOs later, SAA has returned to the fiscus for another R5bn bail-out, this time dressed up as a "guarantee". David Gleason estimates that since 1997, the taxpayer has stumped up more than R16bn to keep the flag flying. Yesterday’s revelation that the airline’s balance sheet is far redder, to the tune of about R1.25bn in losses last year, than previously thought suggests that the ailing airline will revisit, soon enough again, the government trough.

Relax, it could be worse: in Argentina, state carrier Aerolineas Argentinas loses a whopping $2m a day, making its annualised losses about five times worse than the leaked balance sheet of SAA suggests.

The CEO of Aerolineas proclaimed with nationalist fervour: "The colours of the Argentinian flag rise with every takeoff." And, like SAA, so do the losses. I was struck on my recent flight homeward to read the remark of SAA (now former) CEO Siza Mzimela: "We will continue to be a catalyst for economic growth in SA and the rest of the continent." On current trends, SAA may not just be a drag on growth but may also contribute to the widening of the current account deficit.

All this raises the question of the role of the state in the business of owning airlines. The old Tory adage that "the business of government is not the government of business" has been upended in the wake of the financial crisis, which put the kibosh on the light-touch, low-tax regime in which the Bain Capitals of this world flourished and wreaked their trail of "creative destruction".

During my years in Argentina, when we increased the tourist arrivals from there to here by more than 100%, SAA was a vital and valued partner. So, I am forced to admit, given that its political head, Marthinus van Schalkwyk, is my political nemesis, was SA Tourism, which, in a sea of state dysfunction, is an island of professional excellence.

But neither of these facts suggests that state supervision has improved matters in government-owned entities. All of which leads back to Andrews who, in the event of a Romney win, could be a very big figure in the next US administration. In Parliament in June last year, Jeff Radebe — today in the firing line over various failures on his justice watch but who was then minister of public enterprises — memorably tore into then Transnet CEO Saki Macozoma for the multiple lapses of corporate governance around the Andrews appointment.

Macozoma, Radebe and Andrews have all moved onward and upward since then. Meanwhile, SAA and its state owner are nose-diving over the fiscal cliff and widening our national deficit, the one matter Obama did talk about last Wednesday.

• Follow Tony Leon on Twitter: @TonyLeonSA.

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