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Just when 1time needed the free market the most, the only true monopoly in South Africa announced its ‘Ruin 1time plan’. Earlier this week it was announced that the South African government [Treasury] had issued South African Airways a R5 billion guarantee, ostensibly to allow it to borrow money to buy new aircraft. What the step really boils down to, however, is an act to ensure SAA’s continued operation, ahead of non-government favoured rivals such as 1time and Comair.
According to Business Day, reporting on comments by Erik Venter, CEO of Comair:
The failure of nine of the 11 private airlines that have attempted to compete with SAA [since the early 1990s] showed the effect of SAA’s state support, especially as for many years it continued to make losses.
The state guarantee for two years would allow SAA to borrow from the financial markets to acquire its new fleet, but Mr Venter said privately owned airlines did not have this luxury and had to fund acquisitions out of their cash flow.
As always, the South African government’s interference in what should be a market affair is funded by money expropriated (or still to be expropriated) from the South African taxpayer.
Folks, observe true monopoly industry in operation: 1) the government, using its expropriation powers to tax its subjects, guarantees the continued existence of 2) a wasteful enterprise that would never have survived on the market. The wasteful enterprise, SAA then proceeds to 3) dump its inferior services into the local market, at subsidised prices, 4) ruining the local competitors (1time).