FlightCom Magazine 23
T
HE aviation sector contributes R50.9 billion (2.1%) to
South African GDP. This total comprises: R20.1 billion
directly contributed through the output of the aviation
sector (airlines, airports and ground services, and
aerospace); R21.0 billion indirectly contributed through
the aviation sector’s supply chain; and R9.8 billion
contributed through the induced effects of spending by
the employees of the aviation sector and its supply chain.
In addition there are R23.4 billion in ‘catalytic benefits’ through tourism.
The aviation sector supports 227,000 jobs in South Africa. This total
comprises: 56,000 jobs directly supported by the aviation sector; 116,000
jobs indirectly supported through the aviation sector’s supply chain; and
54,000 jobs supported through the spending by the employees of the aviation
sector and its supply chain. In addition there are a further 116,000 people
employed through the catalytic (tourism) effects of aviation.
The average air transport services employee generates R721,132 in Gross
Value Added (GVA) annually, which is over four times more productive than
the average in South Africa.
The benefits of state funding are expressed in what follows. The airlines
are at the very core of all this economic activity, and most of it would be
severely affected by the liquidation or shrinking of the airlines’ operations.
There would be a notable impact on airport retail, in-flight catering suppliers,
freight forwarders, baggage handling, spending by employees and tourism.
Economic activity would suffer due to the loss of connectivity.
If you had to remove SAA from the economic landscape the airfares
would drastically climb unless effective competition could be introduced very
quickly. Having an appreciation for all the above, it prompts the following
questions: Is helping SAA to not only survive, but investing in the company
to ensure its economic prosperity, not justified by the huge benefits that have
accrued and will continue to accrue to South Africa? Most of the critics
point to a R20 billion subsidy/bailout by the tax payer. Is this figure accurate
and was it not in fact a loan guarantee with the money borrowed from the
banks? If SAA was adding even R5 billion per year to the national economy,
would a R1 billion annual subsidy not still make sense? There is a correlation
between aviation expansion and economic benefits to the economy, as well as
the effect of creating more direct and indirect jobs.The naysayers –
KEEP SAA
STATE OWNED!
pay R150 for a show that probably cost R1,000 per
paying patron. The thing is, it’s the poor, not the
taxpayer, who subsidise my ticket at the opera and
SAA. The funds were diverted from some other
budget item such as healthcare, services, housing
or education. It’s the poorest of poor who die in
government hospitals or live in tin shacks who
have paid for my luxurious indulgence. Subsidising
SAA is subsidising the country’s most wealthy and
pretentious elites, just like subsidising opera. If I
fly to Beijing without having a connection in, say,
Singapore it is the beggar on the corner who pays
for me to avoid a minor inconvenience.
But as an opera lover you don’t mind that
the poor subsidised your opera seat? You
would prefer to have paid R1,000 for your
seat?
I do. It’s obnoxious. Culture vultures have the
arrogance to say it preserves culture and values,
and creates trickle-down, knock-on or multiplier
benefits; that sophisticated people will invest here,
and such like nonsense. But if I’m not willing to pay
what my opera ticket actually costs then I shouldn’t
go to the opera. The most principled option for
elites is to boycott opera, loss-making SAA routes
and anything else supported by subsidies diverted
from the poor.
And finally, if SAA was consistently
profitable, what should government do
with it?
It’s a ‘Catch 22’. At present they should sell
it because it’s insolvent. And if it were profitable,
there’s an even better case for selling it. It should
be sold either way. The government has no business
running an airline. Treasury Minister Nhlanhla
Nene said as much when he said in October that
the state should exit none core assets. I say he must
go further and release funds from state owned
enterprises like SAA for use in housing, hospitals
and schools, and of course crime control. Those are
the real priorities for our government.
Defenders of South African Airways' continued state
ownership rely heavily on a study IATA commissioned
from Oxford Economics Research in 2011. IATA’s
Mike Higgins presented their findings at a briefing as
part of the AFRAA conference. Although the numbers
in the report are from 2009, they are still very
instructive.