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FM Edition:

Now that we know how much of a needless cash drain the state’s misadventure in business has been, let’s try salvage some value for the citizens on whose behalf government manages companies. Of all the state-owned companies, the airlines have been a particular waste of money and talent.

Finance minister Pravin Gordhan has acknowledged this. He has also pledged to halt the flood. This will be done by offering private investors equity stakes in SA Airways (SAA), which includes Mango , and in SA Express . But first government wants to merge these into a single entity. This, in my opinion, is a mistake.

There is no need to merge SA Express into SAA and Mango. That would only create another huge, unwieldy and complex business that would be as disastrous as SAA is right now.

Correctly capitalised, each of these entities can stand on its own two feet. But they have to be managed by people who have the correct skills and incentives to manage them for profit.

Other business people have shown it is possible to run airlines profitably, difficult as it is. Comair has been doing so with great success for nearly 70 years.

SAA has to be turned into a nimble, agile operator after fixing its management and putting proper governance structures in place. This could be achieved by separating it into at least four different entities. These would be the low-cost carrier Mango, SAA Technical, the food-service business and the full airline with international flights. We have seen in the past that focusing on the high-margin routes in Africa provides cash flow and fosters integration on the continent.

SAA’s domestic operation is a business on its own, and couldbe released to compete for its survival without putting the rest of the company at risk.

And SA Express could either be sold entirely to a company like Fastjet, to bulk up its regional routes across Southern Africa, or listed on the AltX.

The strategy must be to enhance competition between the companies, with government holding minority stakes in each of them.

A similar partnership with the private sector already works at Telkom, where government owns a 38% share. In Vodacom it also worked wonders, and taxpayers have derived real benefit from the billions in taxes and dividends paid by the company.

Private investors would come in, buy majority stakes and turn the companies into proper businesses that also pay taxes. There is nothing that instills discipline and focuses the minds of managers more than shareholders who demand a return on their investments. Ask Comair.

All of this would be possible only once politicians have weaned themselves off their desire to control things they are not equipped to handle.

The next question is: what shouldgovernment do with these minority stakes?

Once the companies are stabilised — by private investors with the help of professional management teams — real value would be created. This couldbe used to properly empower the marginalised in our society.

Giving government-owned shares to unemployed and poor citizens would go some way to narrowing the gaping inequalities we face. This could be done in a manner that benefits all classes and races in society.

The middle class can invest in whatever company it wants. Relieving it of the need to fund perennial losses through taxation would be sufficient benefit.

The shares could be distributed in equal tranches to people of a certain age and whose incomes fall below a certain threshold. Of course many would immediately sell the stocks. A centralised and well-managed process, such as that of Sanlam at its listing, would take care of price volatility and overhang. That would be real empowerment for our millions of poor and unemployed compatriots. Alternatively, the money could simply be channelled into tertiary education. Either way, society wins.