of Public Enterprises, Alec Erwin, before the National Council of Provinces
(NCOP)
27 March 2007
Introduction
Honourable Chairperson
Members of the Council
Ladies and gentlemen
This SAA Bill marks significant progress in the process of separating SAA
from Transnet Limited ("Transnet"). The intention of the Department is to focus
Transnet on the movement of freight by rail, through the ports and in the
petroleum pipelines. SAA is a major enterprise in its own right and operates in
an industry that has markedly different conditions to that of the rail and port
freight systems. Accordingly, to ensure that there is full focus by the boards
and management on these differing domains it has been decided to remove SAA off
Transnet's balance sheet and move its shareholding to the Department of Public
Enterprises (DPE).
Purpose and provisions of the Bill
The draft Bill gives legal effect to the decision to separate SAA from
Transnet, which was set out in an agreement between Transnet, SAA and the
Minister of Public Enterprises acting in his capacity as the representative of
government. As part of the conditions of that transaction, we are bringing this
Bill before Parliament. The Bill is largely a simple enabling piece of
legislation. The portfolio committee raised the entirely valid point that if
SAA was strategically so important that it is brought before this Parliament
then surely any change in its future status must also be important and if this
was the case what role would Parliament play. The precise matter that
precipitated this discussion was the provision that allowed for the conversion
of SAA from a private company (as it is now) to a public company. The majority
of the State-Owned Enterprises (SOEs) that are major public entities under the
Public Finance Management Act (such as Eskom and Transnet) are also public
companies.
This status allows these public entities to rely primarily on their balance
sheets for purposes of funding their respective operations and reduces the
extent of reliance on government guarantees. This is something that we also
wish to encourage for SAA. The ability to fund off a balance sheet essentially
distinguishes state enterprises from government agencies and utility
companies.
However, this issue raised an even more basic issue relating to any change
of legal status of a SOE. It so happens that within DPE and along with work in
the Department of Public Service and Administration (DPSA) and the National
Treasury similar issues were under recent consideration. We support a process
where major changes in the future will allow for a role for Parliament. The
Departments are working on this body of legislation that will deal with the
overall strategic shareholder management of the SOE. Accordingly, I am happy to
report that we are in agreement that this issue will be dealt with more
effectively in the proposed legislation which we will come to Parliament in the
second half of this year.
A departure from the enabling legislation of the other public entities is
the insertion of a preamble to contextualise and specify the significance of
SAA as a strategic asset to the State. This is something that was agreed upon
with the portfolio committee and is a precursor to the overall approach to the
shareholder management of the SOE in the draft legislation just referred
to.
The preamble gives the basic strategic reasons for retaining ownership with
the State in order that we retain strategic control of the decision making in
SAA and therefore help us promote air links with our main business, trading and
tourism markets within the African continent and internationally.
As members may be aware to contribute to the rapid growth of this continent,
we need a strong aviation platform. South Africa and the continent are the
third fastest growing markets in the global airline industry. The continent
cannot grow faster without a strong aviation platform and air transport is the
only real form of transport on the African continent given the inadequately
developed transport infrastructure, geographical landscape and the very vast
distances on our continent.
As we build up to the 2010 World Cup it is important that South Africa has
an effective and large airlift capacity both within our borders and to all the
key destinations within Africa and the other continents. SAA is a well
established airline with a very good reputation for safety and service. The
airline industry is a very challenging and highly competitive industry,
however, we are confident that we can stabilise and then grow the airline. It
is not our objective to compete with the large global airlines. Our objective
is to provide an effective intercity network on the African continent and to
reach out to major cities on all continents so that we become the preferred
carrier to Africa and South Africa in particular. Along with the regional
carrier South African Express and the other flourishing private airlines in
South Africa we believe that we can increasingly improve the affordability and
availability of air passenger transport in Africa. It is also pleasing to note
that true low cost airlines are taking firm root in South Africa and that there
is a healthy competition between them. This is a very positive development for
air travel and I am sure that it will spread more widely into the African
continent as the African economies grow.
Conclusion
I would like to thank the chairperson of the select committee and its
members for the hard work and assistance they have provided the Department and
I in getting the Bill processed at such short notice. My thanks to the
Department and to SAA for all their hard work which is much appreciated.
I thank you!
Issued by: Department of Public Enterprises
27 March 2007
Source: Department of Public Enterprises (http://www.dpe.gov.za/)
