Treasury to give SAA R10 billion in special appropriation

National Treasury has agreed to give SAA a special appropriation of R10bn by the end of September, director general, Dondo Mogajane, told MPs on Wednesday (September 13).

“It will be for R10bn, we have decided, because that will cover everything,” he said during a briefing on the ailing airline’s latest quarterly results to Parliament’s standing committee on finance.

This after Deputy President Cyril Ramaphosa told the National Council of Provinces that any funds being considered to help address SAA’s maturing debt will have to be appropriated through a special appropriations bill that will be introduced to Parliament.

The bill is due to be tabled in a special sitting and Mogajane said he hoped the legislature would agree to the measure, adding that Treasury would be forced to look at a “Plan B” if MPs refused to support it.

He said nine lenders had agreed to roll over debt that would become due at the end of the month, while Citibank has agreed to roll over a portion of the R1,761bn the loss-making airline is due to repay by September 30.

SAA relies on government guarantees of R20bn and needed government help in July to cover its debt. Treasury paid R2,2bn to Standard Chartered earlier this year, with money taken from government’s emergency fund.

Treasury’s announcement follows much speculation about the form of further financial aid to the airline, following a leak of a proposal to sell Telkom’s shares to recapitalise SAA. Mogajane said the bill would not be linked to the proposed sale, which would raise an estimated R14bn.

The briefing also saw SAA confirm that none of the five assumptions on which it has based its turnaround strategy had materialised. These were SAA being a going concern, debtors extending terms for a minimum of three years, government giving a capital injection of at least R13 billion over three years, as well as the retiring of five excess wide-body aircraft and the retention of all the narrow-body aircraft in its fleet.

One of its narrow-body aircraft has been retired and five more would follow by the end of the month.

This will lead to a reduction of 37% of its share of the local market and 4% of the international market.

IMC on SOEs looking into SAA challenges

Meanwhile, Deputy President Ramaphosa said an Inter-Ministerial Committee (IMC) on SOEs was looking into strengthening state-owned enterprises that need support, including SAA, in order to return to their profitability.

He said the challenges faced by SAA were quite complex. “SAA is a 100% state-owned company and it is operating in a very difficult market. Airlines around the world are not your most profitable entities. Right now, SAA is right there facing headwinds and difficulties from an operational and profitability point of view. In the past, it operated well and made profits and right now, it is facing great difficulties and needs the bail outs that only the government can give it,” Ramaphosa said.

“From the IMC point of view, we have been looking at processes and policies that can enable our state owned enterprises to operate better,” he added.

The first thing the IMC looked at is how best the boards can operate and how best management can operate and how the financial stability of these entities can be upheld, the Deputy President revealed, adding it was government’s belief that once the boards of SOEs can be repositioned and empowered with good management, they can be run in a manner that they can be in a much better position.

“…this is precisely what we are doing right across the various state owned enterprises. Having set out the policy, we are also looking at how the balance sheets of these companies can be better managed and how the financing can be better structured so that they are not driven into bankruptcy,” he said. 

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