Buy or lease? Min­is­ters at odds over jets

Sunday Times - - NEWS | POLITICS - By SABELO SKITI

Pub­lic En­ter­prises Min­is­ter Lynne Brown is in a stand­off with Fi­nance Min­is­ter Malusi Gi­gaba over an “in­flated” air­craft deal for South African Ex­press that has grown by more than R100-mil­lion in nine months.

Brown this week threat­ened to go ahead with­out his con­sent while Gi­gaba threat­ened to pull R950-mil­lion in govern­ment loan guar­an­tees to the air­line.

The stand­off comes af­ter the Na­tional Trea­sury this year paid R5.2-bil­lion from the Na­tional Rev­enue Fund to save SAA. On Fri­day, the govern­ment said it would pay R3­bil­lion from the fund to Citibank. The bank had re­fused to ex­tend loans to SAA that were guar­an­teed by the govern­ment.

In April, Stan­dard Char­tered Bank told SAA it would not roll over a R2.2-bil­lion loan due to ma­ture at the end of June.

Sources close to the SA Ex­press trans­ac­tion said the Trea­sury had taken is­sue with the R160-mil­lion price for four Bom­bardier air­craft that the com­pany had leased since 2006. The lease is due to ex­pire this year.

The Sunday Times es­tab­lished that last Novem­ber the own­ers of the air­craft, Royal Scot Leas­ing, agreed to sell the Bom­bardiers to SA Ex­press for R40.4-mil­lion. An in­sider at the air­line said at the time that it had de­cided buy­ing was the bet­ter op­tion.

“When lease con­tracts come up we have to re­turn the air­craft with cer­tain re­turn con­di­tions at­tached, and some­times it makes bet­ter eco­nomic sense to buy. This was one of those cases [where] we saw that we would need $6-mil­lion (R81-mil­lion) and they were will­ing to sell the air­craft to us for $3-mil­lion,” he said.

An SA Ex­press of­fi­cial, with knowl­edge of the deal, said the first deal had been all but com­plete when act­ing chief ex­ec­u­tive Vic­tor Xaba in­structed it be restarted.

The Sunday Times un­der­stands that Brown told Gi­gaba on Septem­ber 14 that the deal to buy the air­craft would go ahead.

A re­sponse sent by Trea­sury this week was seen by the Sunday Times. It said: “. . . In the event that SA Ex­press pro­ceeds with the trans­ac­tion with­out the req­ui­site ap­proval from the min­is­ter of fi­nance, the air­line will be in con­tra­ven­tion of a guar­an­tee con­di­tion.” A con­tra­ven­tion would re­quire govern­ment to re­call its guar­an­tee.

Brown’s spokesman Colin Cruy­wa­gen said dis­cus­sions were con­tin­u­ing.

This week Brown re­vealed that SA Ex­press had paid about R5.7-mil­lion to Gup­talinked com­pany Tril­lian Cap­i­tal Part­ners.

Re­ports sug­gested that the air­line’s unau­dited fi­nan­cials showed it made a R234-mil­lion loss in the 2016-17 fi­nan­cial year.

Trea­sury spokesman May­ihlome Tsh­wete did not re­spond to spe­cific ques­tions, but said: “De­lib­er­a­tions on the is­sue are still on­go­ing and de­tails will be com­mu­ni­cated once this process has been com­pleted.”

SA Ex­press did not re­spond to our ques­tions.

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