South African Airways’ (SAA’s) administrators recently proposed that the government put up at least R26.7 billion to rescue the embattled carrier.
This comes after years of losses and the grounding of commercial passenger flights to contain the spread of COVID-19.
Many stakeholders, including the Democratic Alliance (DA), have rejected the proposed SAA business rescue plan.
“SAA has been bankrupt for the past decade, relying on bailout after bailout as a succession of poor CEOs squandered all hope of profit and goodwill with poor business practice,” the DA said.
“Liquidation is the only realistic option for SAA at this point. In no way, shape or form should the government be handing out bailouts to a bankrupt black hole of an entity.”
This view is shared by the Free Market Foundation, which said the money can be much better spent in other areas.
“SAA has not shown a positive return on investment for years,” said Jacques Jonker, an economic and legal analyst at the Free Market Foundation.
“Throwing more money at it benefits substantially fewer people than what would be the case if the government opted to use the money in a fruitful manner.”
What can be done with R26.7 billion
The Free Market Foundation highlighted that the government could spend the SAA bailout money on things which will benefit South Africans far more, like housing and education.
It said using the money for housing, funding university degrees, or building for community clinics would provide substantive, tangible benefits to hard-working South Africans.
“If the government chooses to ignore the possibility of delivering these benefits, it will effectively be dumping the opportunity costs of not pursuing such options on citizens, especially the poor,” Jonker said.
This raises the question of how many RDP houses, university degrees, laptops for students, or mobile data bundles for learners the government could buy with the proposed R26.7 billion in SAA funding.
The infographic below provides an overview of what R26.7 billion can buy South Africans.
