SAA needs R21bn for turnaround, says CEO

• ANC tries to shut media out of presentation to Parliament • Funding needed over three years

SAA needed to raise R21.7bn over the next three years to turn the company around and make it profitable, CEO Vuyani Jarana said in an interview on Monday.

Jarana said SAA had finalised its five-year plan. It would take R12,5bn to support workingcapital requirements over the next three years to break even.

SAA owes the banks R9,2bn, a debt cumulated over the past few years. It would take R21,7bn to put SAA in a sustainable financial position.

Jarana said that SAA was in discussion with its shareholder to find an optimal funding structure to support the business plan. The size of the capital injection would depend on government’s assessment of how much debt SAA can carry and was being considered by an oversight committee chaired by Deputy Finance Minister Mondli Gungubele.

The funding requirement arises from SAA’s turnaround plan, which was to be presented to Parliament’s finance committee on Wednesday.

However, after a dispute in the committee in which the ANC tried to close the meeting to the media and public, the presentation of the plan was deferred.

Jarana said the R21.7bn would be comprised partly of a capital injection from the Treasury and partly of debt raised from commercial lenders and guaranteed by the government.

The Treasury said on Tuesday it supported SAA’s turnaround strategy. “Funding of the turnaround strategy will require an acceptable mixture of debt and equity, and this matter is being finalised. National Treasury will follow the normal budgetary process, which will entail seeking cabinet approval.

“The outcome of this process is expected to be finalised in time for the 2018 [medium-term budget policy statement],” the Treasury said.

SAA is in a parlous state and has not been profitable since 2011. Over the years it has received more than R55bn in government bailouts, only to return to the Treasury repeatedly, leading to it being dubbed “an unreformed alcoholic” by Treasury officials.

Jarana said that the R21.7bn, together with other measures

contained in the turnaround plan, would be sufficient to end the pattern of repeated bailouts. It would reduce debt, cut the amount of cash going towards debt-servicing costs and reopen lending from banks, closed to SAA since June 2017.

Despite SAA still having unutilised guarantees of about R6bn, Jarana said banks had refused to lend against these because SAA could not demonstrate how it would become profitable. “Now we have a commitment letter from Treasury that says they will inject capital.”

But as the government can only appropriate money for SAA when the adjustment budget is tabled in October, Jarana said the company had in the interim approached banks for bridging finance of R5bn, using the letter of commitment provided by the Treasury. “Between now and then we were looking for bridging finance … to service outstanding payment to suppliers, make arrears payments on interest repayments and to provide working capital … that deal is as good as done and in the final stages,” he said.

The R5bn in bridging finance was previously reported in the press as a R5bn bailout or equity injection. It will, however, form part of the much bigger bailout that SAA is hoping to secure from the Treasury in October.

It is not known when the finance committee will discuss the turnaround plan. The ANC caucus in the committee, which applied to Parliament to close the committee on the grounds that “market-sensitive information” would be divulged, could not be reached for comment.

The DA said it was bizarre that the ANC wanted to keep the plan secret. “We have pumped billions of rand into what amounts to a ‘zombie’ stateowned airline, which has, once again, whipped out its begging bowl, requiring a further bailout,” said DA MP Alf Lees.