Cape Town – South African Airways (SAA) would not have had a new board if it wasn’t for the pressure lenders applied on Finance Minister Malusi Gigaba, according to economist Iraj Abedian.
Speaking at the Cape Town Press Club on Friday, Abedian, also CEO of Pan-African Investment and Research Services, said power has now shifted to capital markets.
“They basically said to the finance minister: ‘Unless the chairperson (Dudu Myeni) goes, we’re not lending you more money.’
"It’s about time that business speaks up,” Abedian said, adding that Gigaba did not change the SAA board because he was convinced it was the “right thing to do”.
“He did it because he was forced to. If he was more experienced he would have done it much earlier,” Abedian said.
Gigaba officially announced on October 19 that Cabinet approved the appointment of six new board members for SAA, including a new chairperson to replace embattled Dudu Myeni.
Myeni is replaced by Johannes Bhekumuzi Magwaza as the new chairperson, and Nolitha Fakude is the new deputy chairperson and non-executive director, replacing Tryphosa Ramano.
New board members who will serve as non-executive directors are Geoff Rothschild, Ahmed Bassa, Tinyiko Mhlari, and Martin Kingston.
Fin24 earlier reported that local banks also demanded that SAA honour its debt obligation.
This comes after Standard Chartered Bank in June and Citibank in September respectively declined to extend the duration of their loans.
Gigaba is expected to give a detailed plan on the amount SAA will receive to continue as a going concern when he delivers his mini budget on Wednesday. He earlier said that SAA would require a R10bn capitalisation, but that the form or source of the funding has not been finalised.
Government’s disposal of its shares in Telkom to bail out SAA is no longer an option. On October 12, Telkom removed its cautionary notice regarding government's plan to sell its 39% stake in the firm (valued at about R13bn). The option to sell this stake to fund the bailout therefore no longer exists.
Deficits on many levels
On Friday, Abedian said South Africa faces deficits on many fronts – not only in respect of its budget, but also a deficit of experience in the finance ministry.
“Our budget deficit is close to 5%, but the minister doesn’t know how to spin it.”
Abedian, who has been involved in institutional and economic policy making since the Mandela administration, said the finance portfolio in government is the “toughest ministry” to learn.
“You juggle three things – politics, economy and you need to know how finance works. And government finances are not the same as business finance. In the best of times with the brightest individuals, it takes at least two years to understand the portfolio.”
According to Abedian, Gigaba doesn’t only have a deficit of experience, but also an ideological deficit.
“He was the champion of South Africa being a developmental state. Now he champions radical economic transformation and inclusive growth. These are un-mergable concepts and the two are not the same.”
Growth rate brought to zero
Abedian pointed out that South Africa’s dismal growth rate was brought to zero by the powers that be; it did not fall to zero.
“In 2009, Wits University asked me to write something about the developmental state. What I wrote then deeply unfortunately turned out to be true. I said it won’t deliver as the reformers in government weren’t in place.”
At the time, Abedian ascribed the failure of realising the objective of a developmental state to the the emergence of patronage and the extraction of fiscal resources.
“But I was absolutely wrong about the extent and magnitude of it.”
Eight years after he wrote the piece for Wits, South Africa’s growth halted to zero.
“All our fiscal indicators are going the wrong way and this is a precursor to a fiscal cliff. We’re not there yet, but we’ll see what the minister delivers on Wednesday.”
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