SAA in need of R21.7bn for new plan
Big push to end repeated bailouts
National carrier SAA needed to raise R21.7-billion over the next three years to turn the company around and make it profitable, chief executive Vuyani Jarana said in an interview.
The funding requirement arises from SAA’s turnaround plan, which was to be presented to parliament’s finance committee yesterday.
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 R21.7-billion 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 size of the capital injection would depend on the government’s assessment of how much debt SAA is able to carry and was under consideration by an oversight committee chaired by Deputy Finance Minister Mondli Gungubele.
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 R55billion 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 R21.7-billion, together with other measures contained in the turnaround plan, would be sufficient to end the pattern of repeated bailouts. By paying back debt, reducing interest payments, reducing the number of employees and reducing unprofitable routes, SAA will reach profitability by 2020, says the plan.
The recapitalisation 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 R6-billion, Jarana said banks had refused to lend against these because SAA could not demonstrate how it would become profitable.
“For now our only avenue for funding is to approach the shareholder.
“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 R5-billion, 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 R5-billion in bridging finance was previously reported in the press as a R5billion 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 “marketsensitive information” would be divulged, could not be reached for comment.
The DA said it would not support a closed meeting and it was bizarre that the ANC wanted to keep the plan secret.
“We have pumped billions of rand into what amounts to a ‘zombie’ state-owned national airline, which has, once again, whipped out its begging bowl, requiring a further bailout. We believe that the turnaround plan should be made public so that it can be determined whether it has a realistic prospect of success,” said DA MP Alf Lees.
Funding of the strategy will require an acceptable mixture of debt and equity