Govt urged to privatise aviation services
Boniface Keakabetse | Friday November 20, 2015 14:57
The suggestion was contained in a Business Botswana presentation at the recent Aviation Pitso titled, ‘Exploring Business Opportunities in Aviation’, by Mark Spicer, managing director of Bluesky Airways.
Spicer noted airports the world over have traditionally evolved mainly as government-run enterprises adding that many are, however, now seeking the privatisation route to improve their abilities to compete in the new global economy. Spicer said reasons to privatise airports include to diversify operations, enhance profitability, fund expansion, and to improve competitiveness.
He said the arguments for privatisation include the declining availability of public funds, and a need to change to the market-oriented outlook that private businesses develop.
Moreover, Spicer said privatisation enables a long-term focus to meet the demands of international competition, to maintain a customer-focused plan, and to free the government from providing subsidies to an unprofitable enterprise. According to Spicer, countries such as Canada, Australia, and New Zealand have taken the path of mixed public-private control of the aviation sector to maintain power over matters that affect the public good.
Spicer further explained that privatisation removes the burden from the government’s finances, spread the risk associated with operations, and introduce ways to improve efficiency and competition.
Said Spicer: “If the airport is run under a government department, facility commercialisation would be difficult. Private management can reorganise the business so that the airport’s costs and revenues can be monitored and adjusted. Costs can be cut and revenues boosted.”
He cited the Lanseria Airport in South Africa as a good example of a privately run airport.
On the benefits of the privatisation of the state airline, Spicer shared how the privatisation of Kenya Airways was the first ever privatisation of an African airline.
He said, “This was a major state-owned asset and the process by which 77 percent of the shares of Kenya Airways were sold to private investors took two years”.
According to Spicer, although the process proved very divisive and a source of intense public debate, the privatisation was carried out successfully. He said the result of the restructuring was a reduction in after tax losses by 62 percent.
Spicer said as per the Kenya Airways audited financial reports of 1989-1998, the airline registered a gross profit from a previous loss in 1992.
From the group presentation, delegates at the Pitso called for the review of the Air Botswana Act to enable the corporatisation of the airline to improve its efficiency and enable private sector participation in the sector.
Another group resolved for the review of Civil Aviation Authority of Botswana (CAAB) Act to separate regulation from operational roles.
It was resolved that CAAB should concentrate on regulation and relinquish airport services such as cargo services and fuel services to the private sector, especially at the busiest airports such as Maun. Presenters also called for more liberalisation of the skies to allow private sector participation.
“We need a clear policy on how the private sector can play a role in the local aviation scene” said Odirile Merafhe in one of the group presentations.
Merafhe argued that chances of attracting any intercontinental airline to fly into Botswana are almost zero at the moment because of the population saying, however, Botswana can leverage against that by connecting to other regional hubs, which can be helped through private sector participation.