Where Will Funding of New SAA Come From?

The Treasury has said it will support and source funding for a business rescue plan of South African Airways, and it appears that the government might not be the major shareholder in a rebooted airline, according to a statement released by the Department of Public Enterprises.

“While maintaining a certain level of presence in the ownership of the new carrier,” the Department of Public Enterprises said in a statement today, “the DPE welcomes the attraction of a mix of local and international investor groups to provide the new airline with technical, financial, and operational expertise to ensure significant South African ownership whilst diversifying the investor base.”

The government has always maintained that it would never give up majority shareholding in SAA.

The DPE announced the Treasury’s support of the plan, which calls for an injection of at least R10 billion to keep the airline going instead of liquidating it. However, Minister of Finance Tito Mboweni has said on numerous occasions that Treasury would not bail out SAA again. He was not quoted in today’s DPE statement.

At the same time the Democratic Alliance has condemned the continued bailout of SAA when the country is dealing with millions of job losses because of COVID and lockdown, as well as the complete collapse of the health system in the Eastern Cape publicised most recently on the BBC.

On Tuesday, SAA’s creditors agreed to the business rescue plan for SAA, which would see severance packages to 2,700 employees, costing over R2 billion, among other measures.

It is projected that R10.1 billion will be required to fund the rescue plan, clean up and stabilise the balance sheet of SAA, restructure the rest of the Group entities that are not in business rescue, provide working capital for the rest of the group’s entities, and to create a stable and viable platform for a new restructured national airline. Different tranches of money will be required as different aspects of the restructuring takes effect.

In its statement today, the DPE said the funding of the airline – it did not say where this would come from – would result in the emergence of “a new viable, sustainable and competitive national airline.”

“In terms of the business rescue plan that was published by the Business Rescue Practitioners for SAA, government, as the sole shareholder of SAA, is required to provide a letter of support for funding the plan ‘where it results in a viable and sustainable national flag carrier that provides international, regional and domestic services.’

“A letter of support that commits the government to mobilise funding for the short, medium and long term requirements to create a viable and sustainable national airline was signed by the Ministers of Finance and Public Enterprises on 15 July 2020 and provided for the BRPs.”

WATCH DA’s Geordin Hill-Lewis in Parliament.

Hill-Lewis argues in Parliament that National Treasury should not give a letter of guarantee for SAA. He said now is the time for Minister Mboweni to draw a line in the sand and refuse to fund the “new” SAA.