Political patronage on the competitiveness of SAA against privately owned airlines.

Abstract

The nature, foundations, and objects of both state-owned and privately-owned entities are to meet the commercial mandate of being profitable. Be that as it may, state-owned entities (SOEs) are established to generate extra revenue for the government other than tax-based revenue. To this end, the government in South Africa and elsewhere has various SOEs established for the latter mentioned fact, and as such, the government maintains dominant control over these entities. Using South African Airways (SAA), which is a South African SOE, and Comair, a Privately-Owned Entity (POE) operating alongside SAA, we examine the effects of political patronage on the competitiveness of SOEs against POEs. We use qualitative research methods to narrate these effects, relying on multiple existing scientific and official reports as our data sources. We argue that SOEs such as SAA are not competitive like POEs such as Comair. This is due to the fact that, while SAA has been relying on the government for bailouts since 1994 to date, Comair has had to sustain its operations without relying on the government like SAA. We further maintain that SAA’s existence is based on patronage. The bailouts by the government for SAA sustain the patronage network of ministers in charge of entities, CEOs, and board members. We conclude that POEs such as Comair are focused on commercial mandates, while SOEs such as SAA are focused on non-commercial mandates based on political and patronage networks