House Chair, I
extend my greetings to the hon members of the House. I'm very thankful for the opportunity to participate in a debate on this important matter that hon Inkosi Buthelezi has put for discussion.
I'd like to say from the outset that, having listened to the hon members who came to engage in the discussion, I'm not so sure hon Buthelezi would be so inspired, particularly given how he framed the discussion. He
premised the discussion on invoking a national sentiment that is still ringing in our heads - a very powerful statement that says we are stronger together. It is that sentiment that, through difficulties, keeps us going. I think that was a very powerful platform laid for this discussion. [Interjections.]
I'm sure that cannot be stupid. It is definitely not stupid, and no one can think of it as stupid given just the recent memory we have of how that slogan has carried us through the entire world. I think that is made to be part of this ... is really very important. [Interjections.]
South African Airways is indeed our national flag- carrier, capable of providing reliable and extensive air transportation capacity, linking South Africa with the continent and the world.
Unfortunately, it is objectively the truth that the airline has been financially and operationally challenged for many years as a result of both external and internal challenges.
It is important at this point to say that it is a world- wide phenomenon that the aviation industry is characterised by very thin margins, a phenomenon experienced by the best-performing airlines in the world. South Africa has the added challenge that its geographic location is outside of the main traffic flows of the northern hemisphere.
Compounding these challenges are high costs relative to revenues, inefficiency, low productivity and poor management decisions. These factors have all contributed to the multiplicity of problems at the airline.
It is undeniable that, for the airline to compete effectively and cease being a drain on the fiscus, it is imperative that it be turned around and be made fit for purpose.
The Minister of Public Enterprises, during his Budget Vote speech in this august House, indicated that the department supports the turnaround strategy of SAA.
The turnaround strategy has four main pillars, and I would like to spend some time on it: firstly, revenue stimulation and network optimisation; secondly, the organisational redesign of the entity; thirdly, dealing with supply-chain transformation, as a many of the challenges reside within this area; and, fourthly, the business process transformation, particularly targeting SAA Technical.
During the course of the year, that strategy has been reviewed and updated to take account of the challenging external competitive environment as well as progress in implementing the initiatives.
Despite the challenges it faces, the airline has been making progress. I would like to indicate a few of those aspects of progress in terms of the implementation of that turnaround strategy. Firstly, the airline has obtained approval to lease four A350-900 aircraft to be utilised on the long-haul routes of New York, Frankfurt and Hong Kong. These aircraft are expected to reduce fuel and maintenance costs and boost revenues. The fleet that was used to operate such routes has proven itself to be a
lot more costly in terms of maintenance and fuel costs. Secondly, the airline has concluded its organisational design exercise aimed at streamlining operational and decision-making processes and improving productivity. The airline has initiated the mandated consultation processes to give effect to that redesign. Invoking the provisions of the Labour Relations Act in pursuit of the necessary restructuring that should take place has already been introduced to the airline's stakeholder community. The airline has reviewed contracts with its top 20 vendors - the so-called evergreen contracts - which account for just over half of the company's total annual spend. The airline is implementing initiatives to reduce costs. Thus far, over R500 million has been saved.
In addition, the airline has reformed its procurement processes to strengthen governance and eliminate corruption.
A new CEO has been appointed at SAA Technical and other key positions are being filled. Procurement issues have been addressed and the airline is ensuring compliance
with the regulatory requirements of the civil aviation authority.
Importantly, over the past few months, the airline has started to put a management and leadership team in place that is committed to and capable of delivering on its goals.
Government has also pledged support to the airline to enable its turnaround. South African Airways already has a R19,1 billion government guarantee facility of which R11,8 billion is currently utilised. R5,5 billion was transferred to SAA in the current year to enable the carrier to repay debt and fund its working capital requirements.
In addition, during the Medium-Term Budget Policy Statement, Minister of Finance proposed that R9,2 billion be allocated to SAA over the next three years to repay its existing government-guaranteed debt. He also highlighted that the recovery of the airline was unlikely in its current configuration.
In this, we are in full agreement. Many of the colleagues who spoke here are harping on this question.
To this end, Cabinet recently approved that the state- owned airlines be consolidated into a single group structure. Cabinet also approved that the process of searching the market for strategic equity partners to explore possible partnerships be commenced. In addition to bringing the management expertise required to turn the airline around, such partnerships can result in the burden of any future recapitalisation being shared between government and such partners.
The department has issued a request for proposal for the appointment of transaction advisors to assist in implementing these Cabinet decisions. However, given the challenges facing the airline, achieving a successful turnaround requires alignment and commitment from all stakeholders, including SAA's board and management, government, lenders, employees and unions.
That is why the message that hon Buthelezi carried in his introduction of this motion is so important because it is
only when there is alignment and when we act together that we are likely to see progress earlier.
The decision by the SA Cabin Crew Association and the National Union of Metalworkers of South Africa, Numsa, to embark on industrial action was indeed regrettable and unfortunate in the circumstances. Rather than contributing to the much-needed recovery of the airline, the strike has only served to exacerbate its problems.
Again, having said this, it has also provided an opportunity in which the future possibility of acting together exists. I think confidence needs to be strengthened, and that is what we will be supporting that environment to achieve.
The further aggravation by court action at this time may also not be helpful to the situation. There needs to be a better, nuanced approach to dealing with this difficult matter.
The department believes that the recovery of the airline is still possible and that this can be achieved within
the parameters of the fiscal support already on the table, but this will require determined, concerted action across the board. In saying this, I am speaking to the issue of whether there is still the need for additional support, be it in the form of guarantees or cash injections. The existing arrangements do make for a possibility to undertake all these ventures without the need for the fiscus to be relied upon again.
This can ensure that jobs at the airline are preserved to the extent that that is necessary. This will also maintain connectivity with South Africa's key trade and tourism partners, with positive spin-offs for the economy, particularly in the tourism sector, which employs many low-skilled people.
As I conclude, this requires that we act together. Of course, it is true that very tough decisions in the immediate need to be made. But, as we do so, it should be that everyone who matters ... of course, ultimately the public is taken into confidence about measures that are taken to conclude this matter so that we have a viable airline. A possibility of partners in the external
environment will strengthen this going forward. Thank you.