SAA fares best with budget support

“The sword of Damocles has now fallen on us,” finance minister Tito Mboweni said in his budget speech on Wednesday, referring to SAA’s crash landing after years of losses and bailouts.

SAA fared the best of the state-owned enterprises (SOEs) in terms of budget support, other than Eskom, which was already placed on life support in 2019’s budget with a huge R150bn bailout to spread over 10 years.

Mboweni said he did not intend to say much about Eskom as “this was an old story”, but when it came to SAA the inevitable had come to pass as the airline had been placed in business rescue. The proverbial sword of Damocles — which he referred to in 2019 — had fallen.

SAA will have debt and interest payments taken care of and get extra support to fund restructuring. SAA will get R16.4bn to cover debt repayment and interest costs. This includes R9.2bn of historic debt owed to commercial banks and R2bn borrowed from the consortium to fund business rescue. In January, SAA got a R3.5bn Development Bank of Southern Africa emergency loan.

In addition to debt repayments, there is additional allocation for interest payments over the period, bringing the total over the three-year period to R16.4bn. The amount that SAA will get to fund the remainder of the business rescue process was not quantified in the budget.

Mboweni, whose private view is that SAA should be sold, said business rescue “would lead to a radically restructured airline. The associated restructuring costs will be reprioritsed within the budget,” he said.

Eskom, allocated R23bn a year for the next decade in the 2019 budget, will get allocations over seven years rather than 10, due to front-loading of the allocations, which began in 2019.

Although Eskom does not get exra resources in the 2020 budget, it will get substantial support of R112bn from the fiscus over the three-year budget period. This includes the R23bn allocated over the medium-term period plus additional appropriations announced during 2019, which allocated another R33bn for 2020/2021 and an additional R10bn in 2021/2022.

A Budget Review table shows that from 2008 to the end of 2022/2023, the government will have bailed out SOEs to the tune of R291bn. The bulk went to Eskom (R244.7bn) with SAA coming second with a total bailout package over the 15-year period of R38.4bn.