Strings snarl up SAA funding
SAA, the ailing national carrier, has received about 10% of the R10.5bn it was allocated in the medium-term budget policy statement, but the advance comes with stringent conditions, which the businessrescue practitioners say contravene the law.
SAA, the ailing national carrier that has been grounded for the better part of 2020 due to Covid-19, has received about 10% of the R10.5bn it was allocated in the medium-term budget policy statement, but the advance comes with stringent conditions that the business rescue practitioners say contravene the law.
The R1.5bn was an advance on the R10.5bn signed off by the Treasury in the budget policy statement in October for SAA s business rescue plan.
Business rescue practitioners confirmed they received the funds on Monday afternoon.
However, the conditions that were stipulated for how it should be spent are in contravention of both the Labour Relations Act and Chapter 6 of the Companies Act. So, we are unable to utilise the funds until the conditions have been amended [by the department of public enterprises],” they said on Thursday.
Business Day understands that the department is insisting the money be used to pay SAA s subsidiaries, while the airline s employees, who have not been paid for eight months, are still waiting for their money.
According to the Companies Act, secured creditors and employees are top of the list of those to be paid first after the business rescue costs.
Unions said they would be picketing at SAA headquarters on Friday to demand that the airline pay workers salaries.
The department of public enterprises did not respond to questions on the conditions attached to the advance.
The crises at SA s parastatals, in the main Eskom and SAA, have put the government under pressure to show its intent on the restructuring of state-owned entities and reducing the financial burden on the fiscus. Ratings agencies have cited state-owned entities including Eskom and SAA, which carry debts approaching R700bn, among the major risks to the sustainability of the nation s finances.
The government has reportedly put a $400m ( just over R6bn) price tag on a stake in SAA as it pushes to finalise a deal with an equity partner to help restart the airline that has not turned a profit since 2011, costing taxpayers about R6bn per year since then.
Bloomberg reported on Thursday that the $400m would be used to recapitalise the reformed SAA, citing people familiar with the issue. According to the report, the government is banking on SAA attracting interest because it holds some lucrative routes and valuable landing slots, such as at London s Heathrow Airport.
The Financial Mail reported this week that the department was in talks with Fairfax Africa Holdings, the listed subsidiary of Toronto-based investment firm Fairfax Financial Holdings, to take a strategic equity stake in SAA, or what remains of the airline.
The R6bn price tag represents close to 50% of SAA s ’ assets, which include aircraft, pockets of land and some of its subsidiaries.
If confirmed the figure is likely to put off potential investors amid the Covid-19induced uncertainty that threatens to cripple the broader aviation industry and related sectors. The airline industry remains in dire straits across the globe amid concerns of a second wave of Covid-19 infections.
Many companies have also adopted a work-from-home culture and video conferencing, which has reduced the need for air travel.
The International Air Transport Association projected last week that airlines would lose $157bn in 2020 and 2021 due to the slowdown in air travel caused by Covid-19.
Department of public enterprises spokesperson Richard Mantu said the department was not in negotiations with Fairfax and was not aware of the reported talks or the $400m price tag on a stake in SAA.
For the record, the department is not in negotiations with Fairfax as a possible strategic … equity partner for SAA. The process of identifying a strategic equity investor is currently with multiple parties who have expressed an interest in SAA. We will announce those details once the process has progressed,” Mantu said.
Joachim Vermooten, an independent aviation analyst, said any transaction involving SAA would be complicated considering that the airline is insolvent and not trading.
He said a fundamental question that needed to be answered was whether the airline would focus on a developmental or commercial mandate. The former approach and subsequent sloppiness in handling the business rescue process had led to enormous losses and left creditors and employees in the lurch, Vermooten said, adding that closing down the airline should be seriously considered.
THE PROCESS OF IDENTIFYING A STRATEGIC EQUITY INVESTOR IS CURRENTLY WITH MULTIPLE PARTIES
Richard Mantu Department spokesperson