Cape Town – Comair’s [JSE:COM] failed high court application against South African Airways (SAA) receiving constant government bailouts needs parliamentary attention, CEO Erik Venter said on Tuesday.
North Gauteng High Court Judge Hans Fabricius said in his judgment on Monday that any “optimism or pessimism regarding the recipients’ [SAA] ability to re-pay any loan is not a requirement for any relevant guarantee”.
Venter told Fin24 that it was concerning that it took a private JSE-listed company to challenge a public enterprise that was regulated by Parliament.
“The disconcerting thing about all of this is that ultimately the Members of Parliament are representatives of the taxpayers in terms of managing taxpayer funding,” he said.
“[Concerning is] the fact that this issue has never actually been raised by any other Member of Parliament or opposition parties that the Minister of Finance [Nhlanhla Nene] has this sole discretion to fund state-owned enterprises without it going through Parliament.
“We hope there will be some more action in Parliament to … [question] how much power has honestly been granted to … [Nene] at his sole discretion,” said Venter. “Hopefully, if it simply kicks that channel of questioning into play, then we will be happy that it has achieved something.
Why ruling was concerning
“What came out of the ruling is that the minister [Nene] has actually got sole and unlimited power to bypass the parliamentary control over taxpayer funds, even when tough decisions [are] no longer based on financial considerations,” said Venter.
“He, furthermore, doesn’t have any obligation to record his rationale for his decisions.
“The ruling also clarifies that government policy does not need to be taken into consideration by government itself and it cannot be deemed to create any legitimate expectation from the public.
“This is all of huge concern both to me as a taxpayer and someone operating a business.
“We don’t honestly believe that this is the underlying intention of either of the Public Finance Management Act or the Constitution."
AUDIO: Erik Venter interview with Fin24's Matthew le Cordeur
Implications of ruling
“The implications of the ruling are actually quite severe in terms of what power is actually given to the minister of finance and the government’s view on its own policy.”
Venter said there were “quite a lot of gaps in the ruling that would allow us [Comair] to take it on appeal if we choose to do so”.
“What’s come out of the ruling is that we’re simply going to have to deal with the same old SAA that we’ve been dealing with for the past 20 years.
“Our case was not to stop the funding of SAA, but to have the parliamentary duty to oversee the use of taxpayers’ funds emphasised and also to have government take into consideration its own domestic air transport policy when making these funding decisions,” he said.
Bumpy ride for competing airlines
Venter said that economically, South Africa was “sitting in a pretty tough position”.
“The domestic air transport market hasn’t grown since 2008, so we’re actually sitting with less passengers in the South African domestic market than what we saw in 2008.
“There are not that many countries in the world that have had such a stagnant environment,” he said.
“Even Europe, with a fairly poor economic environment, has seen passenger volume growth.
“So we are definitely seeing the impact of the economic situation on the airline industry.
“But despite that, Comair managed to continuously achieve greater efficiencies … and therefore been able to stay in business and fight the issues we’ve had with SAA.
“For new entrants into the market, it’s obviously going to be phenomenally tough in this kind of environment,” he said. “We [Comair] go through these cycles of new competitors coming in and going out.
“New competitors are going to have to face that risk [of SAA getting continuous bailouts]. Whether they can stick it out like we have … will depend on how effective they are at managing their airlines.”
National Treasury told Fin24 on Tuesday that it welcomed the judge’s decision. "The
department is busy studying the judgment,” it said in a written reply