Will Zimbabwe sell its ailing airline?

By Farai Shawn Matiashe
Posted on Wednesday, 24 August 2022 15:07

A new Zimbabwe Airways Boeing 777-200 lands on the tarmac in Harare, Zimbabwe, April 11, 2018. REUTERS/Philimon Bulawayo

With its spectacular landscapes, sultry climate and entrepreneurial people, Zimbabwe’s tourist industry should be booming. However, it is struggling having been hobbled by political interference and corruption for decades.

The national carrier, Air Zimbabwe, symbolises much of what has gone wrong. Despite the Mnangagwa government proclaiming that it was “open for business” when it took over in 2017, the condition of the state-owned airline has worsened since then.

Industry sources argue the best plan for the government would be to privatise Air Zimbabwe, following the government’s sales of equity on its national carrier.

However, Mnangagwa’s cash-strapped government would first have to find ways to pay off Air Zimbabwe’s massive debts, and that would mean a further raid on taxpayers’ funds at a time of deepening economic misery in the country.

So far, there is little sign the Mnangagwa clique are ready to let go of the national carrier that has been a vehicle for political patronage for four decades.

Last month, the transport minister, Felix Mhona, appointed a six-member board to lead Air Zimbabwe, taking over from an interim board appointed last year.

The airline that faces a myriad of problems – mounting debts, ageing aeroplanes, government interference and poor management.

Without structural reform at the carrier, the newly-appointed board will, like their predecessors, enjoy lavish allowances, but fail to fix its core problems.

The new board, at least, has the requisite experience ranging from marketing, aviation, accounting, tourism and commercial law.

It is led by Silvano Gwarinda, alongside Ruth Raina Hungwe-Rukarwa, Edmund Murambiwa Makona, Lawrence Simbarashe Musendekwa, Ticharwa Garabga and Mucharemba Kahombe.

Once touted as the best airline in Africa competing on international routes in 1980 when Zimbabwe gained independence from Britain, Air Zimbabwe now mostly flies domestic routes from Harare to Victoria Falls and Bulawayo.

The question should be asked whether there is a market for such an airline at all

It inherited 18 planes in 1980 but is now left with eight aircraft most of which are not operational.

This year, Air Zimbabwe was banned from flying into European airspace because of its failure to meet international safety standards. This limits its routes to regional destinations, such as Johannesburg and Dar es Salaam.

Debt overhang: a stumbling block to investors

Air Zimbabwe has been a feeding trough for top officials in the state and the ruling party Zanu PF.

They hijacked the airline for political gains while its top management was appointed based on nepotism and political loyalty.

President Robert Mugabe’s son-in-law Simba Chikore, married to the former Statesman’s only daughter Bona, was made its chief executive officer in 2016.

During Chikore’s tenure, there was a scandal over the use of $70m  – when Mugabe tried to set up a new airline, Zimbabwe Airways, and controversially purchased two Boeing 777 long-haul jets.

In 2018, Air Zimbabwe was placed under reconstruction with debt clearance, a priority.

About 10 investors had expressed interest, but would not partner with the airline due to the debt. As of June 2021, Air Zimbabwe’s debt stood at $380m, owed to both foreign and local creditors.

In mid-2021, the government passed the Air Zimbabwe Debt Assumption Bill to turn around the airline by having taxpayers pay the debt.

Can privatisation help revitalise the airline? 

“The myriad of problems the airline is facing can be solved by the privatisation of the airline,” Harare-based economist Prosper Chitambara tells The Africa Report. 

“Before the airline can be privatised, its finances must be put in order in terms of high debt levels. Government – as the shareholder – is responsible for that.”

Financial bailouts would just lead to more debt

Chitambara says it needs to reform corporate governance before it can be privatised.

“Putting Air Zimbabwe on a more sustainable course would require that effective action is taken,” says Jee-A van der Linde, an economist at Oxford Economics Africa, a research firm based in Stellenbosch.

“All too often, credible restructuring plans are brought forward only to see implementation fail. Financial bailouts would just lead to more debt – outlays that the landlocked nation can ill afford at this stage – and does not necessarily ensure [it] becoming profitable.”

Marcel, director of aviation at Netherlands Airport Consultants in Johannesburg, says the government should not use public money, but rather focus on creating an enabling operating environment.

Many routes in Africa are very thin, says Langeslag, meaning there is low demand, operating costs are high and funding is expensive.

“The question should be asked whether there is a market for such an airline at all, or whether more international consolidation in the industry would be more beneficial,” he says.

Next door to Zimbabwe is South Africa’s national flag career South African Airways (SAA), which has been struggling for years.

Last year, a private company took 51% shareholding in it, but Langeslag says it is too early to judge its success.

“The airline has been reduced in size … I am not sure if it is even approaching break-even. The private investment that has been announced is still to be completed.”

The better model for Zimbabwe to consider is that of Ethiopian Airlines “which has been operating successfully for many years, as a State-owned airline, seemingly without undue government interference,” says Laneslag

On his appointment, Air Zimbabwe chairman Gwarinda said tapping into cargo services and reactivating its International Air Transport Association membership would be priorities.

Zimbabwe’s ambition to grow its tourism industry 

The Mnangagwa government wants to raise $5bn in revenue from tourism by 2025.

This ambitious target has been hit by local political problems, ripple effects of the Covid-19 pandemic and the Russia-Ukraine war, which has disrupted economies around the world.

Despite this, local officials say Air Zimbabwe is vital for the government’s tourism ambitions.

“The significance of our national carrier cannot be ignored – the thrust is to grow Meetings, Incentive, Conference, Events (MICE) business, which follows the ability to move large numbers of people,” says Farai Chimba, president of the Hospitality Association of Zimbabwe (HAZ).

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