State-owned enterprise bailouts on economic growth : a case on South African Airways

26 Jan 2021

This paper reports on the effects of bailouts on crippling South African economic growth. South African Airways has been receiving endless bailouts since 1999 without becoming sustainable and economically efficient. Just like other State-Owned Enterprises (SOEs), the objective of the airline is to boost the receiver of revenue in meeting the state's obligations; by creating job opportunities and contributing to economic development. However, for the past ten years, its obligation is somewhat muted by the not insignificant contributions made by the taxpayer to keep SAA afloat. When debates on whether to trade it or parts of it to the private sector, or to keep it, little or nothing is said on how bailouts of SOEs impact the economy. This paper uses a qualitative desktop study approach to analyse the bailout history of SAA and for the periods 1999 to 2019 and its significance towards the economy. The SOE's policies and strategic operation plans were used as conceptual and theoretical (policy) framework to track areas of mismanagement that have caused its financial downtrend. The bailout history of the entity was also used to determine the impact on economic growth in South Africa. It concludes that SOEs, through recapitalisation (bailouts) absorb scarce resources which could be used more efficiently by private enterprises, therefore reducing economic growth