S. African Airways, Express Seek Hubs in Ghana, East Africa

South African Airways, sub-Saharan Africa’s biggest airline by passengers, may set up hubs in East and West Africa as it seeks to expand profitable African routes and compete with companies including Kenya Airways Ltd. (KNAL) and Ethiopian Airlines.

The state-owned company, based in Johannesburg, and its unit SA Express want to grow in West Africa, Malusi Gigaba, the country’s public enterprises minister, said in an interview in Accra, Ghana’s capital, yesterday.

“We may want to establish a secondary hub for both South African Airways and SA Express in Ghana,” he said. “We want to establish two secondary hubs in East and West Africa.”

South African Airways was yesterday given a 5 billion rand ($598 million) guarantee by the country’s Treasury five days after its chairwoman, Cheryl Carolus, and most of its board resigned in a dispute over strategy and the company’s finances. Gigaba has been pushing the company to focus on more profitable African routes to lessen dependence on routes to Europe where it faces strong competition.

“It’s crucial for us to access this market,” Gigaba said, referring to West Africa. “We are implementing a strategy to fly to virtually every country on the continent. If we are able to take (customers) to the hub, we can then take them to South Africa.”

“Comparative Advantage”

South African Airways has already decided to increase flights between Johannesburg and Accra to seven from five a week, he said.

Ghana, West Africa’s second-biggest economy, is debating a proposal in parliament to invite private investors to set up a national airline after the collapse of its state-owned carrier two years ago. South Africa “would be open” to helping Ghana set up an international carrier, Gigaba said. South African Airways may seek to partner a Ghanaian airline to service domestic routes, he said.

“We bring a comparative advantage: we’re an African airline and we are state-owned and we could establish a maintenance, repair, and overhaul facility in Ghana to provide training for young Ghanaians,” he said. “A facility that could also provide such service to airlines from other parts of West Africa.”

Denel Pty Ltd., a state-run defense company, is also seeking opportunities in maintenance of military aircraft, he said. “The intention is to synergize the partnership between SA Express and Denel Aviation,” Gigaba said.

External Growth

South African state-run companies such as rail and port operator Transnet SOC Ltd. and power utility Eskom Holdings SOC Ltd. are also exploring investment opportunities in Ghana, including refurbishing the rail line to the western port of Takoradi and renewable energy plants, he said.

“Ghana needs a lot of investment in terms of its infrastructure development because it’s got a massive infrastructure lag,” Gigaba said. “We are aware there are other companies from Brazil and China looking at the same things, but we think there is enough scope for us, too.”

The interest of South African state-owned companies in Ghana comes as privately-owned South African companies such as retailers Shoprite Holdings Ltd. (SHP) and Mr Price Group Ltd. (MPC), have opened stores in the country’s biggest shopping mall.

“The state-owned companies in South Africa seek growth opportunities outside the confines of the South African market,” Gigaba said. “We see Ghana as a strategic country to become our gateway into West Africa, in particular in the fields of aviation and defense.”

To contact the reporter on this story: Pauline Bax in Accra at pbax@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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