SAA CEO: Law is an obstacle to profitability

SAA CEO Vuyani Jarana
SAA CEO Vuyani Jarana

SAA CEO Vuyani Jarana has pinpointed public legislation regulating parastatals as an obstacle, halting the competitiveness of the state-owned airline.

“SAA is probably the only SOE [state-owned enterprise] that is facing open-market competition,” he said speaking at a panel discussion at the Deloitte Gearing for Growth event in Johannesburg last week.

He said the airline was expected to play by different rules from private sector airlines.

Jarana likened the airline to a horse that was used to racing alone with its hind legs tied up but when more competition joined, its legs were still tied.

“You open the sky but you still restrict me with the Public Finance Management Act.

“If you are going to get into a space of open competition, which is the right thing to do, by the way, you have to set your SOEs free in terms of decision making.

“You can’t go through two or three levels of approvals on something that operationally needs to be done tomorrow.

“Equalise the playing field between the SOEs and the private sector so that we can compete on an equal footing, that’s all I am looking for,” he said.

Jarana pointed out that the airline had a high level of strategic societal value but also had to deliver financial value.

“What is important is that when an SOE delivers strategic value and also profitability, that is the magic quadrant we should be aiming at.”

He said although the value of the two targets were not alternatives, in some cases, one target was reached before the other.

He said the airline was at a point where it was not profitable, but it was delivering societal value. We’re getting to a point where we have to fight for profitability but that doesn’t mean there’s no mandate to connect the smaller towns, which the big guys won’t do,” he said.

At the event, SA Post Office (Sapo) chief executive Mark Barnes said the post office had undergone a transformation and although it might not manage to send mail as much it used to [because of internet and emails], its parcels business was growing impressively.

“We are an underused infrastructure. Old-fashioned mail is a declining business but parcels is a fabulously growing business and not just the courier business but the e-commerce side too,” he said.

Barnes said Sapo had numerous offers to buy some of its buildings, which gave it the advantage of a wide footprint, but had declined these offers.

“Those [post office outlets in farflung areas] are not lazy assets. Lots of people have tried to buy our property. You must be careful not to sell the very reason for your existence. We are the closest contact to formal economy for people in the rural areas,” he said.

“There are lots of courier companies in this country and they took our lunch and it was easy because we were not even at the table,” he said, adding that Sapo remained the best courier service in the country by far.

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