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State-owned company vs. South African private company – the winner is clear



The new Finance Minister, Tito Mboweni, was tasked with improving the economy in a bad condition.

South Africa has experienced a recession, and the unemployment rate keep climbing because there seems to be no lag for the average South African.

Mboweni and president Cyril Ramaphosa have an unpleasant task to try to turn things around – and the big hurdle they have to face is state-owned companies that are wasteful of money.

Bailout for BUMN

One of the biggest talking points that came from Mboweni after his appointment was his Bailout R5 billion for SAAand R2.9 billion bailout for the post office of SA.

This decision frustrated many South Africans because of the reputation of these organizations to create it over and over, big loss.

Mboweni noted that many state-owned companies need to be configured, highlighting SAA as a BUMN that requires "radical steps" to be taken.

Ramaphosa also criticized BUMN, calling them sewer corruption.

Recently, DeC's temporary CFO Deon Fredericks said that the company involved in the contract with SAA was cut their settlement requirements from 21 days to 7 days.

This seems to be an attempt by suppliers to get their money before the possibility of SAA's financial collapse.

SAA also struggled to pay the lender R5 billion, which was due before the end of November.

Even if this payment is made, SAA will have to find another R9.2 billion short-term loan at the end of March 2019.

SAA faced R3.5 billion in cash shortages in the same period, adding to its long list of woes.

"The problem with changing SAA around is that the board must continue to focus on funding issues rather than continuing with operational plans," said Fredericks.

Privatization of public services

The leader of the Democratic Alliance, Mmusi Maimane before calling for privatization SOEs that are performing poorly, arguing that state-owned privatization will introduce competition in key industries.

This sentiment has occurred echoed by economists like Azar Jammine, who said the failure of SAA to generate profits since 2011 was the reason why it had to be privatized.

However, there are private businesses that have operated in competition with SOEs.

This is how they compare it with what is owned by the government.


Airlines

SAA is the dominant airline in South Africa, leaving little room for competition due to the support of their government.

Comair provides competition through its brand Kulula.com, as well as through the operation of British Airways domestic flights.

SAA suffered a net loss of R5.7 billion in the previous financial year. National airlines also owe the R16.4 billion, R5 billion of which has been settled with your tax money by the government.

In comparison, Comair has celebrated the increase in year-on-year net income, with 2017/18 profits coming in more than R325 million.

Airlines
AirwayBUMN or PrivateProfit loss
SAASOER5.7 billion in losses
ComairPersonalR325 million profit

Telecommunication

Broadband Infraco is an SEO in the telecommunications sector that provides remote network infrastructure.

The latest report available on the national government website is for the 2016/17 period. At present, Broadband Infraco has suffered a loss of R125 million.

In contrast, the South African private telecommunications giant achieved far better results.

The two dominant South African cellular networks – Vodacom and MTN – posted fairly large profits.

Telecommunication
Network ProviderBUMN or PrivateProfit loss
Infraco BroadbandSOER125 million in losses
VodacomPersonalR15 billion in profits
MTNPersonalR4.5 billion in profits

Broadcasting

SABC is a South African country broadcaster. Besides free-to-air television channels, it also operates in various fields such as radio broadcasts.

For the 2017/18 financial year, SABC suffered a loss of R622 million – citing advertiser cuts, a decrease in the number of viewers, and difficult economic conditions.

MultiChoice is South Africa's leading private broadcasting company, and its flagship product is the popular paid video service DStv and Showmax.

Broadcasting
radio announcerBUMN or PrivateProfit loss
SABCSOER622 million loss
Lots of choicesPersonalR8 billion in profits

Now read: See how much money is lost from Eskom and SAA every second


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