‘Govt created a monster’
Hundreds of jobs lost make Air Namibia’s liquidation “tragic”, but it is in the best interest of the taxpayer and the economy, analysts say.
Jo-Maré Duddy – Government dragging its feet to stop Air Namibia haemorrhaging billions in tax dollars over the years has left the liquidation of as the only viable option, analysts agreed yesterday.
“The writing was on the wall for a long time. Government created a monster which came back to haunt it,” Dr Omu Kakujaha-Matundu, a senior lecturer in economics at the University of Namibia (Unam), told Market Watch.
“Unfortunately, it is the taxpayer who has to pay for the incompetence of government,” he added.
“It is tragic to have arrived at this point where people have to lose their jobs, but years of not wanting to make the tough decisions, poor management and not acting on the considered options, given over the years, have exacerbated the situation and made liquidation almost the only option,” Simonis Storm (SS) said.
IJG Securities research analyst, Dylan van Wyk, commented: “The liquidation should have been considered much earlier. However, it is only now that budget constraints have forced the government’s hand that we have reached the tipping point.”
LOST OPPORTUNITIES
The head of research at PSG Namibia, Eloise du Plessis, said a more orderly privatisation process, maybe a takeover or sale to a private company, would have been a better outcome. “This should have been done years ago, though,” she added.
“The current Covid-19 environment does not provide many buyers as all airlines are under immense strain,” Du Plessis said.
SS said a public-private-partnership (PPP) might have been a better alternative, saving jobs and minimising the impact across the supply chain. Leasing out contracts to the private sector might have been another option. “However, it is difficult to provide an opinion as we do not know the intimate operational and financial details,” SS said.
The analysts added: “The long-going saga around the airline gives one little hope that designing another plan, such as a PPP, would be executed given the track-record of the decision-makers.”
RIGHT CHOICE
“There's no rescue for Air Namibia,” said Kakujaha-Matundu.
According to Van Wyk, liquidation is “by far the best option” as Air Namibia has been operating “unsustainably for many years”. “Over the last ten years, Air Namibia has received over N$8 billion in bailouts, money which could have been put to much more productive use.”
While this was the “right step to take”, according to him, “the feeling is that this was not a choice that government made, but rather a corner it was forced into”.
“Hopefully, we will see more decisive action on other unsustainable budget items like the public sector wage bill, before the cutting of expenditure becomes mandatory,” Van Wyk said.
Although “undesirable”, any negative economic impact that might be caused by the liquidation will be short-lived and the remedies will cost less than the billions in bailouts, SS said.
IMPACT
The liquidation will send ripples through the economy, Kakujaha-Matundu said. Some of the companies which had dealings with Air Namibia, like catering businesses, “will have to close down or downsize”.
According to Van Wyk, there is “a strong possibility” that Air Namibia’s suppliers may have to take some form of haircut with regards to arrears. “This includes fuel suppliers, the Namibian and South African airports companies and the Namibia Civil Aviation Authority.”
The impact on tourism will likely be minimal, he believes.
“Other airlines will quickly fill in the gap left by Air Namibia if there is sufficient demand for a route. We have already seen SA Airlink and WestAir emerge as competitors for the Windhoek-Cape Town and Windhoek-Johannesburg routes, which are quite popular,” Van Wyk said.
A major concern is the impact on jobs – the more than 600 employees of Air Namibia and those who are indirectly employed through the supply chain.
“Sending so many people home … with all the hardship that comes with being unemployed, is very painful,” Kakujaha-Matundu said.
“Nobody wishes for someone else to lose their job,” SS commented. “The question is also how likely is it for these employees to be re-employed somewhere else.”
Van Wyk put the issue into perspective: “The cost of continuously bailing out an unprofitable airline far outweighs the benefit of employing a few. It is unfortunate that these jobs will be lost, however, the decreased burden on the budget is in the best interest of all Namibian citizens and taxpayers.”
“The writing was on the wall for a long time. Government created a monster which came back to haunt it,” Dr Omu Kakujaha-Matundu, a senior lecturer in economics at the University of Namibia (Unam), told Market Watch.
“Unfortunately, it is the taxpayer who has to pay for the incompetence of government,” he added.
“It is tragic to have arrived at this point where people have to lose their jobs, but years of not wanting to make the tough decisions, poor management and not acting on the considered options, given over the years, have exacerbated the situation and made liquidation almost the only option,” Simonis Storm (SS) said.
IJG Securities research analyst, Dylan van Wyk, commented: “The liquidation should have been considered much earlier. However, it is only now that budget constraints have forced the government’s hand that we have reached the tipping point.”
LOST OPPORTUNITIES
The head of research at PSG Namibia, Eloise du Plessis, said a more orderly privatisation process, maybe a takeover or sale to a private company, would have been a better outcome. “This should have been done years ago, though,” she added.
“The current Covid-19 environment does not provide many buyers as all airlines are under immense strain,” Du Plessis said.
SS said a public-private-partnership (PPP) might have been a better alternative, saving jobs and minimising the impact across the supply chain. Leasing out contracts to the private sector might have been another option. “However, it is difficult to provide an opinion as we do not know the intimate operational and financial details,” SS said.
The analysts added: “The long-going saga around the airline gives one little hope that designing another plan, such as a PPP, would be executed given the track-record of the decision-makers.”
RIGHT CHOICE
“There's no rescue for Air Namibia,” said Kakujaha-Matundu.
According to Van Wyk, liquidation is “by far the best option” as Air Namibia has been operating “unsustainably for many years”. “Over the last ten years, Air Namibia has received over N$8 billion in bailouts, money which could have been put to much more productive use.”
While this was the “right step to take”, according to him, “the feeling is that this was not a choice that government made, but rather a corner it was forced into”.
“Hopefully, we will see more decisive action on other unsustainable budget items like the public sector wage bill, before the cutting of expenditure becomes mandatory,” Van Wyk said.
Although “undesirable”, any negative economic impact that might be caused by the liquidation will be short-lived and the remedies will cost less than the billions in bailouts, SS said.
IMPACT
The liquidation will send ripples through the economy, Kakujaha-Matundu said. Some of the companies which had dealings with Air Namibia, like catering businesses, “will have to close down or downsize”.
According to Van Wyk, there is “a strong possibility” that Air Namibia’s suppliers may have to take some form of haircut with regards to arrears. “This includes fuel suppliers, the Namibian and South African airports companies and the Namibia Civil Aviation Authority.”
The impact on tourism will likely be minimal, he believes.
“Other airlines will quickly fill in the gap left by Air Namibia if there is sufficient demand for a route. We have already seen SA Airlink and WestAir emerge as competitors for the Windhoek-Cape Town and Windhoek-Johannesburg routes, which are quite popular,” Van Wyk said.
A major concern is the impact on jobs – the more than 600 employees of Air Namibia and those who are indirectly employed through the supply chain.
“Sending so many people home … with all the hardship that comes with being unemployed, is very painful,” Kakujaha-Matundu said.
“Nobody wishes for someone else to lose their job,” SS commented. “The question is also how likely is it for these employees to be re-employed somewhere else.”
Van Wyk put the issue into perspective: “The cost of continuously bailing out an unprofitable airline far outweighs the benefit of employing a few. It is unfortunate that these jobs will be lost, however, the decreased burden on the budget is in the best interest of all Namibian citizens and taxpayers.”
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