Home Opinion and Features Sale of SAA without public participation undermines our democracy

Sale of SAA without public participation undermines our democracy


The Takatso Consortium’s 51% stake acquisition of SAA, without undergoing a public participation process, sets a bad precedent as it means the privatisation process excludes the public, while emboldening elected politicians to advance business interests, writes Siphokuhle Mathe.

File picture: South African Airways

By Siphokuhle Mathe

SOUTH African Airways (SAA) has ceased to be a state-owned enterprise in the strictest sense, since the government entered into a deal that enabled Takatso Consortium to buy 51% of its stake for a measly R51 (or $3).

In its troubled waters, the airline had failed to be profitable for a period spanning a decade, and the rescue at sea sent it into business rescue.

The only functional button in its life jacket available would need for the key national asset to find an equity partner, that would ensure there was enough air to stay “afloat”.

Thus, one of the provisions of the deal was that the consortium would inject R3bn into the company. Of concern, however, was that this part of the deal does not rid the Department of Public Enterprises of the risk and responsibility of paying bail-outs to cover the operational costs of the airline.

Despite Minister Pravin Gordhan speaking of this as a temporary measure or “contingent liability”, there is no turnaround strategy that matches this deal or its temporary nature.

The state has simply wanted to retain its control of management through what the Department of Public Enterprise calls a “voting majority” and in “matters of national interest”, and yet the long-standing issues (perceived and real) relating to corporate governance and political interference remain unsolved.

The drafters of our Constitution were cognisant of the fact that power corrupts those who hold it.

What they knew was that indirect democracy, in the form of elected members of Parliament, would, at times, mean that the public has no direct influence in state-related decisions.

What they also knew was that waiting five years before having the option to vote against the reigning government, would diminish the quality of democracy which requires citizens’ active participation.

As such, this Constitution had to embrace the notion of participatory democracy to make sure that the “kiss” between the rulers and the ruled remained intact.

This has been the case in the National Assembly and National Council of Provinces, making calls for public comments on white papers and bills which, after adoption by members of Parliament, are assented to by the president.

What drafters of the Constitution did not contemplate was that the state would be interested in selling key national assets, such as the South African Airwarys SOC Ltd.

In the current format, the public is precluded from exercising direct power against the privatisation process.

The sale of 51% of SAA to an equity partner – all the more shrouded in secrecy – sets a bad precedent going into the future, as it means the privatisation process excludes the public, while emboldening elected politicians to advance business interests.

These business interests are often held far from the view of the public, whose day-to-day strife in South Africa makes it difficult to find the time to check declarations that public servants have made.

Furthermore, the execution of the sale foregoes the corporate governance principles of transparency and accountability, as envisaged in the King Reports, developed over the last three decades.

An example of this being the fact that Takatso, for example, is entangled in other deals involving the Public Investment Corporation (PIC), where the PIC itself owns 30% of the Consortium.

The withdrawal of the document from the Standing Committee on Public Accounts (Scopa) is also another threat at transparency, and compromises the possibility of substantive accountability, despite the rationality from Minister Enoch Godongwana that National Treasury had not been a part of the deal of the sale.

The prospects for a constitutional challenge against this sale are important.

Although public participation is understood in terms of legislative processes in Parliament, the question which should be posed to the courts should be similar to that the Constitutional Court was seized by in Doctors for Life International vs Speaker of the National Assembly. In particular, a court would need to ascertain and make a pronouncement as to the nature of the duty to facilitate public participation on this deal.

Part of this exercise would also be to ask as to why there is no policy document in the form of a white or green paper, or even a bill that sets the scene (and grounds) for the possibility of sold assets in the future, particularly as this is being contemplated by Eskom board member Busi Mavuso, in terms of other state-owned enterprises.

The under-guided nature of the deal, exemplified in members being divided on the issue since last year, has had a negative impact – chief to which being the manner in which members themselves struggled to exercise their oversight role in Scopa.

If a state asset can be bought in secret, then so too can the entire state. It is for this reason that the public should be attuned to the many elements that serve to undermine the spirit and purports of the Constitution. That this sale has not been facilitated by members of the Radical Economic Transformation does not mean it is undeserving of rigorous critique, or that it should not be read against the views of the masses.

In an ideal world, citizens who are finance managers and investment analysts would have been able to add rich input as to whether this deal makes business sense, if at all.

Ordinary citizens, too, would have weighed in on whether this national key asset brings any national pride and whether its public “shareholdership” means anything for our collective commercial heritage and identity.

Establishing a developmental state, with systems that embrace all “Batho Pele” principles depends on every citizen and, if politicians in Parliament’s economic cluster do not have the critical mass or incentive to play their oversight role, then it is the quality of our democracy that will wither in plain sight.

* Siphokuhle Mathe is an independent political economist.

** The views expressed here are not necessarily those of the DFA.

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