News

FMF Director Says SAA Should Be Shut Down

South African Airways (SAA), South Africa’s national airline, has been around for over 80 years, but Free Market Foundation Director Temba Nolutshungu says that’s long enough.  The Free Market Foundation (FMF) is a liberal think tank that promotes economic freedom, personal liberty and an open society. Their director believes that SAA stands in the way of several of their values. Nolutshungu claims that SAA’s R9.2 billion debt, and its R15 billion daily operating costs, are having a negative effect on South Africans- particularly the poor. The South African government recently contributed R5 billion to help bail SAA out of some of their debt, but it is already gone. This isn’t including the R20 billion that the National Treasury has given to SAA in the past year. Nolutshungu believes that these funds should be directed elsewhere, to the more desperate needs in the country. But is SAA to blame? And what would the consequences be if SAA were to shut down?

SAA History

“Some say a national carrier is needed to carry the brand of the country. But is a failed airline, sucking billions in diverted resources from the poor and the taxpayers, really a brand to promote for national excellence and to carry our national pride? Simply, no.” Nolutshungu’s comments, made Thursday, imply that allowing SAA to continue operating would hurt the country much more than it would help, both in terms of finances and national pride. SAA has been in financial trouble for quite some time now. In the past 17 years alone, it has cost taxpayers over R15 billion just to stay afloat. Additionally, its local share of the domestic and international market has declined from 95% in 1994 to 17% today. While many argue that SAA’s existence benefits South Africa, the question is: At what cost?

Consequences of shut down

If SAA were to shut down, it would mean the lost of 10,100 jobs. This number is significant in itself, but even more so considering the current rates of unemployment in the country.

Nolutshungu’s suggestion

While many wonder what would happen to SAA’s employees if the airline were to shut down, Nolutshungu has a helpful suggestion: “It may seem extravagant, but a generous retrenchment package of 6 – 12 months would save South Africa billions over the next 3-5 years. The R15 billion SAA is demanding would more than cover this with much left over to wind down SAA in a responsible manner including the re-skilling of all retrenched employees.” With just over 10,000 employees, a hefty retrenchment package would cover not only the expenses and rehabilitation of its current employees, but it would also save the South African government billions that could be redirected at other projects that could benefit the poor.

Many believe that SAA has dug its own grave and needs to find a way to close down that wouldn’t add to the unemployment crisis, but could instead help boost the South African economy. While many employees would lose their current jobs, if the money saved from bailing out SAA is used appropriately, the move could be better for everyone in the long run.

By: Mikayla Tetreault, Staff Writer

40425293671_b4e9c2f911_b