AT THE South African Airways (SAA) results presentation last week, Public Enterprises Minister Malusi Gigaba ordered the airline’s management to withdraw the tender for more fuel-efficient long-haul aircraft because of the South African government’s long-discredited commitment to mercantilist polices.

He said: "(The request for proposals) did not contain crucial elements of industrialisation and localisation, which are vital to South Africa’s policies … there must be benefits for our country."

There is a sound economic reason for not manufacturing jet aircraft, or a significant portion thereof, in South Africa — because we are not very good at it. If South Africa were to try to compete against the world’s most efficient manufacturers, it would be yet another vicious void for taxpayers’ money requiring endless subsidies and costly turnaround strategies.

Taxpayers can thus expect to be saddled with the rising fuel costs required to operate the old foreign-manufactured fleet of aircraft for the foreseeable future. This muddled thinking is made even murkier by the fact that Mr Gigaba has given SAA the go-ahead to acquire foreign-manufactured aircraft for SAA’s short-haul routes.

That plan will see SAA receive 20 new French-manufactured Airbuses to replace the ageing US-manufactured Boeings. There is a simple solution to this "quandary" that will truly benefit all South Africans.

SAA, its subsidiaries and sister outfit, South African Express, should all be auctioned off. The government will receive funds from the sale and a new source of tax revenue will be created. It will finally put a stop to the perennial losses incurred by SAA that amount to more than R20bn. These scarce taxpayer resources could have been used for myriad other uses. Yet the government continues to squander ordinary citizens’ money on flights for the rich.

Jasson Urbach
Economist, Free Market Foundation