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01 September 2020 | Story Dr Cecile Duvenhage

Opinion article by Dr Cecile Duvenhage, Lecturer in the Department of Economics and Finance, University of the Free State

Awards and bailouts

The World Travel Awards recognised the state-owned enterprise (SOE), South African Airways (SAA), as Africa’s leading airline – every year from 1994 to 2015. However, behind the scenes, the flag carrier has repeatedly been given lifelines thanks to government guarantees. The last year that the SAA made a profit was in 2011.

Over the past decade, more than R16,5 billion in taxpayers' money was spent on bailouts for the airline. In the February 2020 budget, the government set aside R16,4 billion, of which R11,2 billion was for SAA’s debt-servicing costs. 

The SAA has been fighting for its survival since it entered into voluntary business rescue in December 2019 and is facing liquidation after specialists were appointed at the end of April 2020 to try to save the airline.  

How did SAA end up in this mess?

After the government deregulated the domestic airline industry in 1991, SAA lost its national market share (of 95%), especially to Comair and FlySafair. The airline was also hit on its African routes, where Ethiopian Airlines started to erode its competitive position. Theoretically speaking, deregulation breaks the market power of a monopoly, and inefficiency will put you out of business in a competitive environment. 

Add the component of poor management and suspect tenders (pertaining to the former SAA chairperson Dudu Myeni’s plan to buy several Airbus planes, sell them to a local company, and then lease the planes back), and debt starts to snowball. Additional poor management decisions include the desperate saving measures on essential expenditure, which led to the buying of ‘fake parts’. Unnecessary sponsorships (ATP tennis), given a tight budget, reflect poor management decisions by SAA. 

Surely, the weak rand played a role in the profitability of SAA, but also for the competitors who managed to survive due to efficient management. 

So, what are the cards on the table? 

The cards include liquidation, foreign direct investment (FDI), and a rescue package under Section 16 of the Public Finance Management Act (PFMA).

The liquidation of the airline will reduce future ongoing operational losses but will require the payment of creditors who rely on the so-called ‘implicit guarantee’ of ongoing funding by the state. Thus, debt claims cannot be avoided, as would be the case with conventional companies. Besides, there is no consensus regarding the liquidation cost – ranging from R2 billion to R60 billion.

Another card is the ‘restart’ of a new SAA, with a smaller international network. This airline needs to be financed by new investors, which might include large international airlines. In this case, the SA government will hold a minority stake, which requires a change of legislation to allow larger GDI into SA airlines. In attracting FDI, the SAA could be revived as a smaller international franchisee airline in cooperation with a larger international airline.

A further card is the option of using citizens’ pension as a business rescue package for the SAA under Section 16 of the Public Finance Management Act (PFMA). 

Section 16 of the Public Finance Management Act

The purpose of the PFMA is “(t)o regulate financial management in the national government and provincial governments; to ensure that all revenue, expenditure, assets and liabilities of those governments are managed efficiently and effectively; to provide for the responsibilities of persons entrusted with financial management in those governments; and to provide for matters connected therewith.”

In terms of Section 16 of the PFMA, the Minister can authorise the use of funds, including the National Revenue Fund (NRF), to finance expenditure of an ‘exceptional nature’ which is currently not provided for and which cannot, without serious prejudice to the ‘public interest’, be postponed to a future Parliamentary appropriation of funds.  

Thus, Section 16 allows the Minister of Finance to sidestep normal budgetary appropriation processes in an emergency to make money available for items of an ‘exceptional nature’ or unforeseen circumstances.

Exceptional and short-term orientated

Exceptional is synonymous with abnormal, atypical, and extraordinary. However, the improvement of the financial position of SAA through recapitalisation has been constantly on the government’s agenda since the February 2017 budget. Four months later (1 July 2017), the National Treasury published a media statement titled Government transfers funds from National Revenue Fund to South African Airways. The argument was that the SAA needed to be recapitalised to allow the airline to pay back its commitment to Standard Chartered Bank, thereby sidestepping a default.  

How exceptional is inefficiency and poor management over a period of ten years, and how biased would such a transfer decision be towards public interest (that favours transparency and accountability), can be asked?

According to the July 2017 media statement, “default by the airline would have prompted a call on the guarantee, leading to an outflow” (take note: not will lead to an outflow) from the NRF and possibly resulting in higher awareness of risk related to the rest of the SAA's guaranteed debt.

The statement also adds that several options have been explored and given the nature of the problems at the SAA, Section 16 of the PFMA “had to be used as the last resort”. According to Minister Mboweni, the government is currently also considering several options, including that the government retains a percentage of the issued share capital in the new airline, finding private equity or strategic partners to take up shareholding in the new SAA, or approaching international or local funding institutions. Of course, local funding institutions include the National Revenue Fund.


Thus, the government may – and possibly already has – partly fund the recapitalisation of the airline using the NRF. Accusations from the Democratic Alliance (DA), an opposition party, state that the former Finance Minister, Malusi Gigaba, used R3 billion of emergency provisions to recapitalise the SAA in 2017.

The DA recently requested confirmation whether the SA Minister of Finance, Tito Mboweni, had again made ‘unlawful’ use of Section 16 in committing to provide and disburse public money for the SAA’s restructuring. The DA also asked the court to interdict SAA and its rescue practitioners (Siviwe Dongwana and Les Matuson) from using the money by any means. The application for the interdict has in the meantime been withdrawn, given the government’s commitment not to use Section 16.

Minister Tito Mboweni’s cards

Although Mboweni indicated that he would protect the efforts of those “who work day and night to make a success of this country”, he is up against a loaded team of government, SAA, and rescue practitioners. The minister expressed a preference for closing the SAA down, but Cabinet has given its backing to a business rescue plan.

The minister recently said that he did not authorise the ‘use’ of funds from the NRF for emergency funding, although he did not exclude the possibility of approaching ‘institutions’ to invest pension funds for this purpose. 

The impact and implication of using NRF

What is in a name, a rose by any other name would smell as sweet? What is in a name, ‘using’, ‘investing’, or ‘mobilising’ pension funds? Do you smell a rose or a rat? Either way, it still boils down to the possibility of ‘getting access’ to the pension funds of hard-working SA citizens to bail out a straggling, poor-managed SOE.

Looking at the poor track record of the SAA and the bleak future of aviation in general (due to the global recession and impact of COVID-19), would an individual, conservative investor opt to invest in SAA? Only political allies making a political decision in their best interest, or aggressive investors being promised high returns on their investment, will take the bait. 

My next concern – will the new, restructured SAA be able to generate profit to remunerate the invested ‘institutions’, given that it currently has only five planes to fly? 
For a start, was the R3 billion emergency allocation (dated back to 2017) retrieved and paid back to the NRF? Hill-Lewis, representing the DA, argued that if the SAA had spent the funds (of 2020), the country and the public purse will be irreparably harmed. Thus, the money may not be retrieved, which will lead to anarchism in the country.

Most parties agree that the SAA remains a strategic asset to South Africa and to its role as the flag carrier, where it assists as an economic enabler with benefits across a wide range of economic activity. However, the parties do not agree on the finance model regarding the bailout of the SAA.

The new SAA needs to generate high profits in a competitive environment to be efficient and cost-effective in its management. Thus, the money need not be forthcoming from a future stream of ‘already recruited’ pension contributions of so-called ‘institutions’. If the latter is indeed the case regarding the generation of income, it reminds me of the activities associated with a pyramid scheme.

SAA, please do not fly us to doom.

News Archive

Former top politician talks at UFS School of Management
2007-04-25

Dr Matthews Phosa, the non-executive chairman of EOH and former politician, presented a guest lecture to a group of MBA students at the University of the Free State's (UFS) School of Management. At the lecture were from the left: Mr Tate Makgoe (Free State MEC for Finance), Ms Nontobeko Scheppers (MBA student), Dr Phosa, Prof. Helena van Zyl (Director: UFS School of Management) and Mr Setjhaba Tlhatlogi (MBA student).
Photo: Stephen Collett

Exploring some of the myths and opportunities cyber space offers

Mathews Phosa

Introduction

It is no longer business as usual. Globalisation poses new challenges as well as opportunities to business, education and society in general. Many of these new opportunities are alive with paradoxes and tensions between local sustainability and global market opportunities. The growth in new communication technologies challenges us to critically explore some popular myths, opportunities and define possible responses.

Cyberspace is often described as the new frontier – not only in the race for newer and faster technologies, but also in education. Any user or provider of services who does not explore this new frontier will soon be considered using “outdated” and will be accused of using obsolete methodologies. Cyberspace, like the spaces embodied in continents, is something that should be claimed and conquered.

Cyberspace and specifically access to information, including online education is hailed as the great equaliser. It is now claimed that everyone will have equal access to “Knowledge”. Cyber education  for example is celebrated as “education-without-borders”, but as Bauman states, while it does change borders and access, it creates new “haves” and “have-nots”.

 

To put it in a nutshell:  rather than homogenizing the human     condition, the technological annulment of temporal/spatial distance tends to polarize it.  It emancipates certain humans from territorial constraints and renders certain community-generating meanings     exterritorial – while denuding the territory, to which other people go on being confined, of its meaning and its identity-endowing capacity.
(Bauman 1989:18; emphasis mine).

Virtual environments and the possibilities offered by the World Wide Web are new spaces that are being colonised and occupied by those who have capital (whether economic or academic) and who are looking for new labour or markets.  While the new mediums include and conquer new spaces, it also excludes and “otherises” communities and segments of society (Prinsloo 2005).  Cyberspace provides institutions and corporations with a space to operate without the responsibilities and obligations of locality – as long as you can afford the privilege of operating in cyberspace.

Cyberspace is therefore not neutral.  Spaces are occupied, reoccupied, abandoned, claimed, fortified, secured – contested.  Those with mobility define and map spaces continuously according to their claims.  Those without capital and the mobility it brings, contest these claims, contest the spaces and hack into the space.  Reclaim it.  Recolonise it.

 

Re-Appropriating Cyberspace

A number of authors explores such a re-appropriation of cyberspace.  Instead of seeing the Internet and related functions like online teaching as just accessing and transferring information, cyberspace is explored as political, social, personal and economic space.  Institutions across the spectrum including higher education institutions venturing into cyberspace often think that it offers them a space without the usual socio-cultural complexities. Gunn, McSporran, Macleod and French (2003:14) however indicate that online “interactions that take place through electronic channels lose none of the socio-cultural complexity or gender imbalance that exists within society”.

Instead of cyberspace being a new space where the differences and disparities of non-virtual life on earth cease to exist, “cyberspace is an imagined network layer sitting on top of the physical infrastructure of cities. Cyberspace is an imagined, continuous, worldwide, networked city; the global city that never sleeps, always experienced in real time” (Irvine 1999, Online). Cyberspace therefore not only sits on top of the physical infrastructure, but is also a mirror image of the power structures and disparities of non-virtual life on earth.

Cyberspace is also much more than just a replication of non-virtual reality. New subcultures and new self-defined communities are coming into existence (Irvine 1999, Online).  These new communities in cyberspace resemble communities in non-virtual format, but they are also vastly different.  For example, Grierson (Online) explores the similarities between cemeteries and the communities in cyberspace.  She finds that, although both “communities” are constituted in space, it is a “placeless place” which “links and mirrors society, with all its alter-egos and hidden desires … a virtual site holding up a mirror to physical reality where subjective presence is delineated in imaginary absence”.

The Internet as “sites for power and knowledge” is further explored by a number of authors, amongst othersNewman and Johnson (1999), Usher (2002), Walmsley (2000) and Borer (Online). Jordan (1999, Online) investigates culture and politics in cyberspace.  He explores three “intertwined levels”, namely cyberspace as “playground of the individual”, as “social space, a place where communities exist” and as “being a society or even a digital nation”.  In each of these three levels, power is played out and claimed in a “sociological, cultural, economic and political battle between the individual and a technopower elite”.

The so-called impact of the Internet on society is discounted by Bennet (2001:197).  He suggests rather that the Internet “should be regarded as a “form of life – whose evolving structure becomes embedded in human consciousness and social practice, and whose architecture embodies an inherent valence that is gradually shifting away from the assumptions of anonymity upon which the Internet was originally designed” (2001:197).

We started by stating that it is no longer business as usual. We can no longer afford epistemologies of ignorance and politeness. Cyberspace and the opportunities it offers for business, society and education in particular need to be interrogated using a hermeneutics of suspicion, confronting certain myths, exploring opportunities and defining appropriate responses.

It is evident that the impact of the cyberspace stretches across the total spectrum of the human experience and condition.  Due to the complexity of discussing the total spectrum of options this discussion focuses on Higher Education as one entity to demonstrate the implications and level of reflection required.
To come to terms with some of theses realities it is necessary to address some of the typical myths. The following aspects provide an indication of some of the myths:

  • Myth 1 - Access. The Internet and online education is not the great equaliser. Access to the Internet on a sustainable and affordable basis is still for the rich and the privileged. There is good reason to celebrate the widening access citizens have to the Internet. In the last number of years the so-called “digital-divide” has indeed decreased. It is however still disputable that having access to the World Wide Web changes lives for the better. For the World Wide Web to deliver on its promise of changing society into more just and compassionate communities, the other divides in society have to be addressed as well.
  • Myth 2 - Quality of information available. Even when/if sustainable and affordable access to the Internet would be available to all; the overwhelming quantity of information on the Internet would require participants to have critical information literacies. Such literacies will be crucial in allowing the “having access to more information” to really allow participants to live differently. Bauman (1989) and others warn of the increasing commodification and consumerisation of knowledge; the immense amounts of information available on the Web, results in information and knowledge becoming “cheap”, and un-validated.  
  • Myth 3 – The role of race and gender. Current research indicates that the unequal socio-economic gender relations are perpetuated in cyberspace. Females have less access and often less frequent access due to prescribed and patriarchally perpetuated life-roles. Research also indicates that males frequently dominate online discussions, often relegating female participants to roles of quiet observer. In this “neutrality” of cyberspace the assumption often is that gender should not matter in a space where identity is often just a name and a short introduction. There is however enough research to validate the role identity and specifically race and gender play in online learning environments.
  • Myth 4 – Guaranteed success as learning platform. International research indicates that very few students opt for fully online learning. Even in countries where access to online environments are either state-sponsored or very cheap, learners do not prefer online learning to more face-to-face learning environments. Students seem to prefer a range of blended learning experiences, rather than fully online. This has impacted on several world-class universities forcing them to cancel fully online offerings. Fully online learning and interaction require specific literacies and personality traits of participants. Online learning is not a “one size fits all”.

 

Research in South Africa indicates that many learners use computers at work to access their learning environments. Not only does this impact on productivity, but learners therefore do not have access to their online learning environments over weekends and when they prepare for the examination. Employers also increasingly block mass-generated electronic correspondence from universities and limit learners’ access to the Internet. This results in learners experiencing growing frustrations with “fire-walls” that do not allow an effective learning environment.

Very few learners are sufficiently prepared to engage and sustain their own learning in a fully online environment. Institutions offering online learning are often inundated with requests for more support, often face-to-face.

  • Myth 5 - Quality in an online learning environment. At present there are no quality indicators specifically focused on online learning environments in higher education. The quality of the current offerings  range from “drop-off and go” experiences where students carry the cost of printing materials with very little continued support and interaction from the side of the institution, to very intensive online teaching which overestimates the time and resources that students have for such learning.
  • Myth 6 - Accountability.  Many overseas institutions offer online qualifications in other countries without any guarantee that the qualifications will be accredited by local institutions of learning or employers. Many students wrongfully belief that because it is offered by an international provider using online, that the learning experience will be of a high quality and that it will be accredited by local education institutions and employers.
  • Myth 7 - Global is better. Though there is a legitimate trend to ensure internationalisation in education, the need for contextual, local and authentic learning remains equally important. The challenges learners face are often context-specific and international tutors in online environments often have very little understanding for the cultural and socio-economic specificities of local contexts. Some metaphors and examples often used in online environments exclude participants from non –western cultures to fully comprehend and apply the learning to their own contexts.
  • Myth 8 - Online teaching and learning is ideologically neutral. All curricula arise from context specific ideological and socio-economic relations and epistemologies. Very few institutions foreground their specific beliefs and assumptions about knowledge and learning. This is even more so applicable in online learning environments where the “designers” of the learning are often even more hidden than in face-to-face contexts.

Opportunities

The Internet does however offer scores of opportunities for institutions of higher learning to seriously consider. The following is but a few of the opportunities that await careful and critical consideration.

  • Opportunity 1 - Reaching the un-reached. Yes, online teaching and learning bring opportunities to many learners who have been previously excluded from training, development and higher education. The reach of higher education does not only entail those who were previously excluded, but also brings into reach qualifications at internationally renowned institutions.
  • Opportunity 2 - Access to information. With the Internet, students have access to the most recent, cutting-edge information. Students will increasingly be able to compile their own curricula and have it validated by institutions of higher learning. Students now have access to the international discourses in the different disciplines at the click of a mouse. While there is a real danger that not all students have (yet) the critical literacies required by the Information age and secondly that they may be overwhelmed and become lost in cyberspace.
  • Opportunity 3 - Communication. With the Internet and other mobile communication technologies, learners can increasingly be in touch with institutions of learning and educators and peers. Learning experiences can be enriched by synchronous and asynchronous communication, between the institution and tutors, tutors among themselves, between tutors and learners and among learners themselves. Online learning really open up a Habermasian “public sphere” for “communicative action”.
  • Opportunity 4 - Mode 3 knowledge-production. Traditionally knowledge production in higher education focused on discipline specific transfer of knowledge, called mode 1 knowledge production. Paulo Freire called this “banking education” (1989). Recent years saw the development of Mode 2 knowledge production where knowledge was applied and arose from practical application to appropriate problem-spaces. Online learning environments make it increasingly possible to move to Mode 3 knowledge production where learners address problem-space from the foundations of a specific discipline but then continue to explore contributions from a range of other disciplines Knowledge production has moved form “knowing-how” to “knowing-in-the-world”. Barnett refers to this change as an “ontological turn” (2005).

The changing role of higher education

It will be naïve and irresponsible for higher education not to interrogate popular notions and epistemologies of online education and the role of the Internet. We have explored a number of myths and (hopefully) created sufficient suspicion to invite further discourse. We have also explored a number of opportunities an online environment offers to business, higher education and society in general.

Higher education has to indeed decrease the “digital divide” not only in the form of broadening access, but also by seriously interrogating the accompanying epistemologies. From the above it would seem as if a responsible and robust response would entail the following:

  • Response 1 - Empower learners with critical literacies for the information age. having access to the information the Internet offers will challenge higher education institutions and learners alike to be able to critically evaluate information and its sources. While addressing access may in fact decrease the digital divide but it is worthless if the decrease in the digital divide does not and cannot result in students’ critical engagement with information and with one-another.
  • Response 2 - Increase access to the Internet through collaborative agreements. Higher education institutions have much more bargaining power than individual learners. It is almost unbelievable that with the “captive audiences” higher education institutions have, that they have not been successful to negotiate more affordable and sustainable access to online environments.
  • Response 3 – Develop quality online learning. Higher education should be very clear about the minimum standards for learning platforms, opportunities for peer and tutor interaction and the sustaining of a teacher presence in Virtual Learning Environments (VLEs).
  • Response 4 – Maintain scholarly online teaching. Higher education should encourage research, individual and collaborative projects to determine the indicators of success of online learning in specific contexts for specific audiences.
  • Response 5 – Higher education as critical praxis.  Higher education traditionally has validated all claims to knowledge and expertise. As Barnett (2000, 2005) has indicated, higher education is no longer the only “producers of knowledge”. However, higher education still has the mandate to validate knowledge, whether claimed or made available in cyberspace. Higher education has the unique opportunity to rise to the occasion and to interrogate knowledge claims. The opportunities should be considered in the context of the realities of cyberspace as discussed.  Fundamental to this is the fact that it requires higher education to increase the capacity of students for critical and compassionate action to assist in the formation and utilisation of the challenges and new opportunities.  Essentially the challenge is to create opportunities and empower students and the broader society to utilise the potential cyberspace towards a more just and equitable society.

In Conclusion

There are a number of myths surrounding online education and the impact of the Internet on business, education and development. Only once cyber space has been demythologised, it is then that our eyes open to the opportunities that it offers. Higher education is therefore called upon to reflexively exploit the opportunities online learning and the Internet offer to engaging one another in learning experiences. Higher education will do well to take both the myths and the opportunities seriously and courageously.

Cyberspace is a new frontier. As previously done with colonial frontiers, this frontier can be exploited ruthlessly. There is however also an opportunity for business and higher education to engage with cyberspace – and use cyberspace to create hospitable, nourishing environments for active learning and a more just and equitable society for all.

References

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  • Bauman, Z.1998. Globalization. The human consequences. Cambridge: Polity Press.
  • Bennet, CJ. 2001. Cookies, web bugs, webcams and cue cats: patterns of surveillance on the World Wide Web. Ethics and Information Technology 3:197-210.
  • Borer, MI. The Cyborgian self: toward a critical social theory of cyberspace. Available URL:
  • http://reconstruction.eserver.org/023/borer.htm (accessed on 10/04/2007).
  • Freire, P. 1989. Learning to question: a pedagogy of liberation. Geneva: World Council of Churches.
  • Gunn, C, McSporran, M, Macleod, H & French, S. 2003. Dominant or different? Gender issues in computer support learning. JALN 7(1):14-30.
  • Grierson, EM. From cemeteries to cyberspace: identity and a globally technologised age. Available URL: Click here!
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  • Irvine, M. 1999. Global cyber culture reconsidered: cyberspace, identity and the global informational city. Available URL: http://www.georgetown.edu/faculty/irvinem/articles/globalculture.html
  • (accessed on 10/04/2007).
  • Jordan, T. 1999. Cyberpower: the culture and politics of cyberspace. Available URL:
  • http://www.isoc.org/inet99/proceedings/3i/3i_1.htm (accessed on 10/04/2007).
  • Newman, R & Johnson, F. 1999. Sites of power and knowledge? Towards a critique of the virtual university. British Journal of Sociology of Education 20(1):79-88.
  • Prinsloo, P. 2005. Don Quixote in cyberspace – charging at the invisible. Open and Distance learning in Africa Number 1, 2006: 78-94.
  • Usher, R. 2002. Putting space back on the map: globalisation, place and identity. Educational Philosophy and Theory 43(1):2002.
  • Walmsley, DJ. 2000. Community, place and cyberspace. Australian Geographer 31(1):5-19.

 

 

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