Government bails out SAA

The South African government yesterday approved the transfer of funds from the National Revenue Fund (NRF) to troubled national carrier South African Airways (SAA) to allow the airline to meet its debt obligations to Citibank and avoid a default.

SAA has to meet its repayment obligations on a Citibank loan amounting to R6.8 billion in total by the end of September, as it also wrestles with the prospect of being unable to pay salaries because of a severe cash crunch.

CitiBank has also cancelled SAA’s R250 million short-term banking facility due to lack of government guarantee, leaving the airline without cash and desperately trying to find local bridging finance.

National Treasury said in a statement that a default by the airline on the R3 billion would have triggered a call on the guarantee exposure totalling R16.4 billion, leading to an outflow from the NRF and possibly resulting in elevated perceptions of risk related to the rest of SAA’s guaranteed debt.

Treasury said the funds would also be used to assist SAA with its immediate working capital requirements.

“This payment was done in terms of section 16 of the Public Finance Management Act (PFMA),” Treasury said.

“This section of legislation states that the minister can authorise the use of funds to defray expenditure of an exceptional nature which is currently not provided for and which cannot, without serious prejudice to the public interest, be postponed to a future Parliamentary appropriation of funds."

On Thursday, Democratic Alliance leader Mmusi Maimane, pictured, said National Treasury’s planned R10 billion bailout for loss-making SAA would only provide short-term relief.

He said the only solution was to place the national carrier under business rescue with a view to privatising it.

Maimane said the sum of bailouts extended to SAA since 1999 came to R14.4 billion, while the company's losses in the past five years added up to R15.7 billion. – ANA

The repayment cannot, without serious prejudice to the public interest, be postponed. Treasury statement