Kirby Gordon, Head of Sales and Distribution at FlySafair
Without doubt, one of the most anticipated topics of the recent State of the Nation address was the ongoing dilemma of what to do with flagging State-Owned Enterprises.
Eskom, the SABC and South African Airways are always particular focus points of this conversation. The public wants to know if more state money is due to be injected into these entities to rescue them and what measures are being taken to prevent need for future subsidies. The question of potential privatisation, or partial privatisation, of these entities remains a burning topic as does the chief political hot-potato - will turnaround efforts result in retrenchments?
At the State of the Nation address, the conversation centred around alternative funding mechanisms, with more specific details around a new business model for Eskom.
Naturally, for those of us in the aviation industry, the fate of the national carrier is of particular interest. In 2018, the World Travel and Tourism Council estimated that the Travel and Tourism sector in South Africa would make a direct contribution of R139.3 billion in 2018. This is the narrowest definition of contribution and includes GDP generated as the result of direct sale of travel commodities (think flights and accommodation), travel industries (think booking services and restaurants) as well as other sources of spending like government and corporate travel spend.
SAA purportedly needs R21.7 billion to be able to implement its turnaround strategy by 2021, along with another R4 billion now to refinance or pay back R9.2 billion on maturing loans. R21.7 billion along with the R4 billion amounts to just shy of R26 billion, which was about 18% of the GDP contribution of the entire industry in 2018. In fairness, if we assume that the R21.7 billion will be spread out over three years, we’ll still look at this year’s bill as being 8% of what the entire industry turned last year.
According to the 2018 Tax Statistics Report issued by SARS, 8.6% of the 56, 7 million South Africans are tax payers, which amounts to 4, 9 million people. If SAA needs R11.23 billion this year, it means that the individual burden on each tax payer would be R2 291, 84 - easily two return tickets from Johannesburg to Cape Town on FlySafair.
Sure, the ultimate burden is not spread across income tax payers alone given that the state fiscus is funded through other sources like VAT, companies’ tax, fuel levies, to name a few.
But, it’s still pretty crazy to think that for the cost of SAA’s expected bailout, FlySafair could fly every South African tax-payer between Johannesburg and Cape Town four times.
In all fairness this isn’t exactly a fair comparison - SAA is an international airline and FlySafair only operates domestically.
But, it’s important to put these numbers into perspective.
When we hear about these entities getting so many billion rand, it’s hard to comprehend how much money that actually is.
But, as a parting thought, consider the difference between a million and a billion seconds. A million seconds is about 11,6 days, but a billion seconds equates to 31,7 years!