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R12m for foreign firm to manage SA's airline mergers

Jan 10 2017 19:07
Liesl Peyper

Cape Town - It will cost government R12.1m to make use of the services of Bain and Company, the Boston-based consultancy firm appointed to manage the merger of South Africa’s three state airlines - SAA, Mango and SA Express, said Public Enterprises Minister Lynne Brown. 

Responding to a parliamentary question posed by the DA’s Alf Lees, Brown said the scope of the work entails the development of an “optimal corporate structure to re-align the state-owned airlines” and that the consultancy will take cognisance of industry best practices.

READ: SA hires Bain, Abacus to advise on loss-making airlines  

In October 2016 at a meeting of the Airlines Association of Southern Africa in Namibia, Brown said airlines worldwide were compelled to restructure their operations to address inefficiencies and remain relevant to the markets they serve. 

“The same is the case with SAA, SA Express and Mango that are in need of such restructuring to effectively and sustainably deliver on their respective mandates,” she said at the time. 

She emphasised though that the “strategic intent” of government is to maintain control and oversight of the state airlines. 

At a portfolio committee meeting of Parliament later in November, Brown said that that there is a merger plan for the airlines, but that it would take three years, BusinessLive reported

She said a holding company for the three separate airlines could be created, or they could be merged into one entity. Another possibility would be to sell a 25% stake in the newly formed holding company to a strategic partner. 

Privatisation calls 

There have been several calls from business and opposition parties for the national carrier to be privatised. 

The DA’s Natasha Mazzone earlier said that “full privatisation” was the only solution to prevent the negative impact SAA has on South Africa’s fiscus. 

The IFP’s Mangosuthu Buthelezi also previously said that South Africa is "pouring good money after bad" and that government should be privatising state-owned entitties, such as SAA. 

READ: 'Privatisation the solution for SOEs'

The national carrier has in the past two financial years made a combined financial loss of over R7bn, while Mango recorded a loss of R36.9m in the financial year at the end of February 2016. 

Both SAA and SA Express are surviving on state debt guarantees at a time when the government is trying to rein in spending and raise revenue amid slowing economic growth.

Read Fin24's top stories trending on Twitter:

mango airline  |  saa  |  sa express  |  lynne brown  |  privatisation  |  merger


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