South African Airways struggles to stay afloat

Between the Chains: SAA needs more bailout money

by Sikonathi Mantshantsha, 25 February 2016, 08:25

SAA. Picture: BUSINESS DAY

 FM Edition

• February 25 – 2016

LAST week two airline companies in different parts of the world rewarded their owners with profits — which is the reason any company is in business. Air France-KLM, the Dutch-French joint venture partly owned by the French state, has this year posted a €118m (about R2bn) net profit, after four years of losses, including €225m in 2014.

Closer to home, Comair reported an R83.7m net profit for the six months ended December. Admittedly, that is half the R163.6m net profit of December 2014. It is a profit nonetheless, and from this the company pays dividends annually.

Comair has been recording full-year profits since its establishment in 1946. It was listed on the JSE in July 1998.

Ethiopian Airlines, wholly owned by the Ethiopian government, says it has been making net profits for the five years to 2014 — the latest available figures on its website. The company claims its unspecified 2014 profit was bigger than that of all African airlines combined that year. That is highly unlikely, but possible.

Kenya Airways, listed on the Nairobi stock exchange and partly owned by Air France-KLM and the Kenyan government, has been making losses for the past three years.

On releasing its interim numbers last November, the company announced a turnaround plan that it says will shave off US$146m in costs over the next two years and return it to profitability.

Which takes us to our own flag carrier, SA Airways. Finance minister Pravin Gordhan is scratching his head trying to find another R5bn “guarantee” so the airline can publish financial results for the year ended March 2015. That is correct — almost 12 months after its year-end the company is still unable to publish its financial performance. That’s because it cannot to do so without admitting that it has been insolvent for a while, and thus would have to file for bankruptcy.

For the year ended March 2014 SAA reported a loss of another R1bn. Try to add that to the operating losses the company has been racking up since the early 1990s and let me know when you have the sum. Please also remind me how many chief executives and board directors SAA has had only in the past five years, if that’s not too much to ask.

If Gordhan, who this week tried to tell the markets and the world that government is prudently managing its finances, grants SAA another bailout, it will add to the more than R30bn of our bailout money the airline has gobbled up since 1999.

On each occasion SAA has promised that “this turnaround plan” will put it on a sustainable path — only to come back with an even fancier promise the following year, backed by yet another clueless public enterprises minister.

So how are these other airlines, which are all much better managed, able to perform while SAA cannot? The main differentiator is that they — other than the Ethiopian state-owned company — have shareholders who demand returns for their money.

From the French, Ethiopian and Kenyan governments to the investors on the JSE, Nairobi, Euronext Paris and Amsterdam, the shareholders demand performance and tolerate no corruption in their companies.

SAA, on the other hand, seems to be used by the SA government as both an employment agency for its more than 11 500 employees and a cash dispenser for the cronies of the politicians in charge.

The company operates a fleet of 53 aircraft. That is slightly more than the 43 planes operated by Kenya Airways and fewer than Ethiopian Airlines’ 76 aircraft. Being a state-owned company, the Horn of Africa carrier also has an inflated staff component, with 12 000 employees (for 23 more aircraft), only 500 more than SAA’s. Kenya Airways, on the other hand, employs the same 4 000 people to operate its fleet of 43 planes as it did to handle 28 aircraft six years ago.

Article from: http://www.financialmail.co.za/opinion/Betweenthechains/2016/02/25/between-the-chains-saa-needs-more-bailout-money (Accessed on 2 March 2016 5.18pm)

Social Grants can’t cope with rising cost of living

Social Welfare: Inflation eats into grant increases

by Andiswa Maqutu , 25 February 2016, 13:39

Picture: THINKSTOCK

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FINANCE minister Pravin Gordhan’s social grant increases are “pathetic” in the light of inflation on essential items and when compared to billions in tax subsidies for the rich.

These are the views of Alex van den Heever, chairman of social security systems administration and management studies at the Wits School of Governance. Van den Heever says social grants are undervalued and often seen as a burden on the budget. The cost of essential household items like food, transport and energy is rising faster than social grants, and this hurts the recipients of the grants as this is where they spend most of their “income”.

The old age, disability and care dependency grants will rise by R80/month, and by a further R10/month from October, adding R11.5bn to social grant allocations over the next three years, says Gordhan. This implies a 5.6% increase on last year’s figure. Inflation topped 6.2% in January.

Monthly child support grants will increase by R20 to R350 in April while the foster care grant increases by R30 to R890. Almost 12m children are beneficiaries of social grants this financial year. Government’s total social grant programme reaches more than 16m beneficiaries.

The overall expenditure on social assistance will rise to R165bn in 2019, from R129bn this year. Last year the department of social development said it planned to extend the age of those eligible for the child grant from 18 years to 21 years, adding 750,000 more beneficiaries. This would align the child grant with the foster care grant, of which 480,000 children are beneficiaries.

Van den Heever says Gordhan’s increase is “essentially pathetic” and that government has failed to provide a process for comprehensive social security reform.

“Nobody really assesses the transfers to higher income earners on the tax subsidy side, which can be regarded as a subsidy for the rich,” says Van den Heever, adding that these subsidies contribute to inequality in the country.

The value of social grants is decreasing with the rising cost of transport, energy and food, says Frans Cronje, CE of the SA Institute of Race Relations.

In the past, social grants helped their beneficiaries and this came with a political benefit for the ruling party. “In the longer term, as the real value of social grants decreases, I think there will be political consequences as well,” says Cronje.

Article from: http://www.financialmail.co.za/specialreports/budget2016/2016/02/25/social-welfare-inflation-eats-into-grant-increases (Accessed 2 March 2016)

‘He used his voice to speak truth to corrupt power’

Pravin Gordhan — A man among Zuma’s mice

The finance minister might be fired this week, or next week. But his work here is done. He used his voice to speak truth to corrupt power

Justice Malala

29 February 2016

Finance Minister Pravin Gordhan with his deputy, Mcebisi Jonas, and President Jacob Zuma at a pre-Budget meeting — PICTURE: ELMOND JIYANE

 

Many commentators say there are no heroes in South African public life. They are wrong. There are many, and they are all around us.

But we need to keep our eyes open and see them at work — and acknowledge their bravery and encourage them to keep going.

Last week Finance Minister Pravin Gordhan joined this legion of heroes.

Gordhan might lose his job, which he has handled with such dignity and aplomb, this week.

It does not matter if he does. He will still be a hero. In just two-and-a-half months he has shown the mettle, the character, of a hero. He stood up against abuse of power and the wanton theft of our people’s resources. He has spoken out against greed without fear.

For this he is already being vilified by those who want to profit from the state and its resources at the expense of the poor.

What has Gordhan done?

In just two-and-a-half months he has told President Jacob Zuma three things: state-owned enterprises will no long be used as piggy banks, and the days of Dudu Myeni running SAA as if it were her spaza shop are over.

He also told Zuma that there will be no blank cheque for building nuclear power stations just because the Russians say so, and state institutions such as SARS will not be used to open up opportunities for Zuma’s cronies or stop probes into the affairs of the president himself.

Last week, Gordhan did what no minister in Zuma’s administration has dared to do: he told Zuma’s best friends — the Guptas of Saxonwold — that he would not be appearing at their sham New Age televised breakfasts. It is a stance that not a single one of Zuma’s 34-member cabinet has taken.

Every single member of Zuma’s cabinet has come running when the Gupta finger has been raised.

Zuma must have been furious with Gordhan. He must have been even more furious when he received numerous calls from the Gupta family asking him to intervene — and he couldn’t.

He couldn’t do it this past week, but his knives have been sharpened. All the compromised people with which he has packed the institutions of accountability are now sniffing around trying to find something with which they can besmirch Gordhan.

Given Zuma’s history, the National Prosecuting Authority, the Hawks and others will find something they can use to try to rattle Gordhan. They will try to use the law to shut him up. We know that the law will be an ass in such a case because it has been manipulated already.

The Hawks, which replaced the admired Scorpions — disbanded because Zuma wanted it so — is headed by Major-General Berning Ntlemeza.

Ntlemeza was appointed by Zuma despite Judge Elias Matojane saying in March last year that Ntlemeza had lied under oath and was dishonest.

“In my view, the conduct of the third respondent [Ntlemeza] shows that he is biased and dishonest. To further show that the third respondent is dishonest and lacks integrity and honour, he made false statements under oath,” Judge Matojane said.

This is why, in September, when he was appointed to head the Hawks, the Congress of the People described the announcement as “a cynical, arrogant and damaging abuse of power” by Zuma. COPE was right.

These are the people we are dealing with now. They are the front and centre of our system.

Who will prosecute Gordhan when Ntlemeza has investigated him? It will be the NPA, another deeply compromised and totally discredited institution whose main job seems to be to intimidate anyone who might want to get a few answers out of Zuma.

Zuma knows how to win dirty fights and so I cannot guarantee that Gordhan will win. Indeed, like Anwa Dramat, formerly the Hawks head, and so many others, he is likely to lose.

Remember that Dramat started sniffing around some cases that implicated Zuma and today he is out of a job and faces further harassment and intimidation.

Gordhan is a hero because, after six years on the Zuma train, he developed a backbone and said “enough is enough”.

Enough to looting of the state. Enough to cronyism. Enough to short-changing and stealing from the taxpayer. Enough to using the organisation of Nelson Mandela and Pixley kaIsaka Seme to steal.

On Thursday morning he warned that South Africa faced becoming a kleptocracy: “There are many parts of transacting between the government and business that have gone seriously wrong and, if we don’t stop it, we’re going to become a kleptocracy.”

Gordhan might be fired this week, or next week. But his work here is done. He used his voice to speak truth to corrupt power. That makes him a hero in my book. There are others in the ANC. I look forward to seeing them find their voice this week, and next week.

This article first appeared in The Times

Article from: http://www.rdm.co.za/politics/2016/02/29/pravin-gordhan–a-man-among-zuma-s-mice (Accessed 01.03.2016)

‘South Africans should ride the financial storm’

Gordhan’s budget: SA must just grin and bear it

2016-02-24 21:34 – Liesl Peyper

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Finance Minister Pravin Gordhan on his way to deliver his 2016 Budget Speech. (Rodger Bosch, AFP) ~ AFP

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Cape Town – All eyes and ears were on Pravin Gordhan when he delivered South Africa’s most-anticipated budget speech since 1994. But the jury is still out on whether the quick-witted and highly respected finance minister did enough to allay the fears of jittery investors and ward off a possible downgrade to junk status.

The rand depreciated sharply 20 minutes into Gordhan’s speech, but mostly because Moody’s downgraded Brazil to junk status. Moody’s believes that Brazil will average negative growth for the next 3 years.

READ: Rand reels as junk status hits Brazil amid Gordhan’s budget

The measures Gordhan announced in his budget were aimed at bringing about fiscal consolidation and included a reduction in the expenditure ceiling of R25bn, shrinking the budget deficit to 3.2% in the current year, stabilising debt at 46.2% and curbing the public wage bill which increased far in excess of inflation last year.

The tax increases he announced were largely aimed at wealthy individuals through increases in capital gains tax and transfer duties on the sale of properties above R10m, while low- and middle-income earners received some good news in the form of zero increases in the personal income tax rate.

READ: No tax hike a pleasant surprise for many South Africans

Tax brackets for these earners were also adjusted upwards to compensate for the impact of inflation. (See tax tables below)

Gordhan made the right noises about not bailing out loss-making state-owned enterprises any longer, indicating that the number of parastatals could be reduced or that some could even be shut down if they no longer served a purpose. The possibility of a merger between South African Airways and SA Express also received praise from the business sector.

READ: Gordhan calls for SAA, SA Express to merge, find equity partners

SA must bite the bullet

Gordhan made it clear that government cannot spend money it doesn’t have, and that South Africans should ride the financial storm.

The banking sector was by and large positive about Gordhan’s speech. “Despite announcing personal income tax relief of R5.5bn for lower- and middle-income earners, the budget speech was a stark reminder that consumers need to get used to doing more with less,” said Ester Ochse, channel head at FNB Financial Advisory.

Johan Gouws, head of Absa asset consultants, was of the view that the budget was “consumer-friendly, recognising the pressures households are facing”.

However, there were also rumblings that Gordhan’s budget fell short of reassuring investors that South Africa is open for business, because structural reform was not addressed. Gordhan also failed to mention the possibility of privatisation of state-owned enterprises.

READ: Gordhan missed fuel levy chance to kill e-tolls – Outa

During a press conference on Wednesday morning ahead of his speech, Gordhan refused to be drawn into any discussion about privatisation. “Listen carefully: I didn’t mention the p-word (privatisation), but I did speak of finding equity partners,” he said.

READ: Gordhan takes swipe at Eskom over tariff hikes

Mark Joffe, CEO of Global Credit Ratings, said it remains to be seen whether credit rating agencies such as Moody’s and Standard and Poor’s will concur with Gordhan’s view that National Treasury has taken sufficient measures to avert a credit rating downgrade for now.

READ: Gordhan didn’t do enough to avert junk rating – DA

* Visit our special issue on Pravin Gordhan’s 2016 Budget Speech.

 

Article from: http://www.fin24.com/Budget/gordhans-budget-sa-must-just-grin-and-bear-it-20160224 (Accessed 28.02.2016)

Sugar Tax to be introduced in South Africa

The secret’s out – SA to get a sugar tax

2016-02-24 15:47 – Adiel Ismail

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Cape Town – South Africans with a sweet tooth will be punished with a higher tax on sweet stuff.

In his budget speech on Wednesday, Finance Minister Pravin Gordhan announced that a sugar tax will be levied with effect from 1 April 2017.

A sugar tax has been mooted by a growing number of consumer bodies and health experts who have been calling for a tax on sweetened sugar beverages (SSBs) to help curb the tide of obesity in SA, which is the foremost cause of obesity in Sub-saharan Africa.

READ: Brace for bitter surprise from Gordhan

Fin24 reported on Wednesday that there was speculation that an announcement could follow in the budget speech.

“This year, in view of the need to raise additional revenue and reduce the budget deficit, we have paid special attention to the fairness and inclusivity of the  tax system,” stated Gordhan.

Among the tax proposals put on the table by the minister is an “introduction of a tax on sugar-sweetened beverages”.

Consuming large amounts of sugar puts people at high risk for lifestyle diseases like diabetes, stroke and obesity.

Research by the University of Witwatersrand found that a suggested 20% tax on SSBs could possibly reduce obesity in 220 000 adults.

SSBs include the following: still and carbonated soft drinks, fruit juices, sports drinks, energy drinks and vitamin waters, sweetened ice tea, lemonade, cordials and squashes.

Other countries that have introduced a sugar tax include France, Mexico and several states in the US.

“We’re very impressed with Treasury for taking this step forward,” said health sociologist Aviva Tugendhaft, deputy director of research programme PRICELESS SA at the Wits School of Public Health.

She said they will continue to provide evidence that supports this approach.

“Our research shows the significant impact that a SSB tax will have on improving the health of the country and generating revenue,” said Tugendhaft.

“In order for the full health benefits to be achieved a SSB tax will need to be part of an even wider comprehensive approach to address obesity and its related diseases.”‘

Tugendhaft said this will have to include things like easy to understand food labelling, advertising regulations and making healthier foods more affordable, among others.

However, Ernst Janovsky, senior agricultural economist with Absa noted with concern that a sugar tax will hit the sugar industry.

Janovsky said this new tax will lead to a decline in sugar usage, resulting in lower domestic sugar prices which will have a negative impact on the sugar industry.

WATCH: Politicians were quick to give their feedback on Finance Minister Pravin Gordhan’s budget. This is what they said:

READ: Heavy tax on ‘sinners’

Meanwhile, smokers and drinkers will again be heavily taxed.

The duty on a packet of 20 cigarettes will up from R12.43 to R13.24, and that on a can of beer (340ml) from 124c to 135c.

* Visit our Budget Special for all the budget news and in-depth analysis.

Article from: http://www.fin24.com/Budget/the-secrets-out-sa-to-get-a-sugar-tax-20160224 (Accessed 28.02.2016)

 

2016 Budget Infographic

A nice infographic showing how government spending will be distributed. Particularly, which areas will receive an increase in funding since 2015 (all above the mid-line) and those areas that will receive less funding than in 2015  (below the mid-line).

Infographic from: http://www.pwc.com/my/en/issues/budget2016.html (Accessed 28.02.2016)

Finance Minister Pravin Gordhan’s 2016 Budget Speech

Here is a link to the finance minister’s full speech:

Click to access budget-speech-2016.pdf

Pravin Jamnadas Gordhan (born 12 April 1949 in Durban) is a South African politician and current Minister of Finance, a position he had previously held from 2009-2014. He is also the former Minister of Cooperative Governance and Traditional Affairs, serving from 2014–2015.^[1]

Early years

Pravin Gordhan was born in Durban and matriculated from Sastri College in 1967. In 1973 he graduated from the University for Durban-Westville with a Bachelor of Pharmacy degree. Gordhan became associated with members of the Natal Indian Congress (NIC) In 1971 and was elected to its executive council in 1974.

During the 1970s, Gordhan helped establish grassroots organisations that became involved in underground activities and associated with the African National Congress (ANC) and later the South African Communist Party (SACP). He completed his pharmacy internship at King Edward VIII Hospital In 1974 and worked there until 1981 when the Natal Provincial Administration dismissed him for his political activities while he was in detention. He was released from jail in 1982 and received banning orders effective until June 1983. Gordhan attended the launch of the United Democratic Front (UDF) in Cape Town 1983 where the also NIC became an affiliated organisation. ^[2]

Gordhan attended the preparatory meeting for the Convention of a Democratic South Africa (CODESA) in 1991 as a joint NIC/Transvaal Indian Congress (TIC) representative, and was appointed NIC/TIC delegate to the steering committee responsible for organising Codesa 1. In 1993 he was appointed to the panel of chairpersons on the planning committee of the multi-party negotiation process.

Career

He was previously the Commissioner of the South African Revenue Service from 1999 to 2009.^[3] From 1991 and 1994, he chaired the Convention for a Democratic South Africa.^[3]

As a member of parliament from 1994 to 1998, Gordhan chaired the parliamentary committee that focused on the implementation of the new Constitution and the transformation of local government in the post-apartheid.

Gordhan was chairman of the World Customs Organization in from 2000 to 2006.^[3]

On 10 May 2009, President Jacob Zuma appointed Gordhan as Minister of Finance, succeeding Trevor Manuel.^[4] On the 25 May 2014, he was replaced by Nhlanhla Nene as Minister of Finance.^[5]

In 2014, Gordhan was appointed as the Minister of Cooperative Governance and Traditional Affairs,^[6] succeeding Lechesa Tsenoli who became Deputy Speaker of the National Assembly of South Africa.^[7]

On 14 December 2015, Gordhan was re-appointed as Minister of Finance, replacing David van Rooyen who had been minister for 4 days.^[8]

(Information from: https://en.wikipedia.org/wiki/Pravin_Gordhan Accessed 28.02.2016)