Fur­ther R2.2bn bailout needed to save SAA

The Star Early Edition - - COMPANIES/ANALYSIS - Siyabonga Mkhwanazi

THE LAT­EST de­ba­cle on SAA has pushed the gov­ern­ment en­ve­lope once more forc­ing it to sell some of its as­sets to fund the R2.2 bil­lion bailout to re­pay the loan from Stan­dard Char­tered Bank.

This is not the end of the fi­nan­cial woes of the na­tional car­rier as it is ex­pect­ing a mas­sive loss of more than R1bn for the last fi­nan­cial year.

The huge losses have left a hole in the bal­ance sheet of SAA, which is bat­tling to stay afloat in a com­pet­i­tive sec­tor where small play­ers have seen dwin­dling prof­its.

The Na­tional Trea­sury is still look­ing at the as­sets it is go­ing to sell to plug the gap on the R2.2bn bailout.

The gov­ern­ment does not want to fund the bailout from the Bud­get.

The na­tional car­rier has also al­ready taken up guar­an­tees of al­most R20bn in the past few years and used most of the guar­an­tees. How­ever, the lat­est R2.2bn bailout has left par­ties in Par­lia­ment up in arms warn­ing that the gov­ern­ment can­not con­tinue to be held hostage by SAA.

Par­ties want SAA to stop bleed­ing fi­nan­cially as it im­pacts on its abil­ity to func­tion and on the gov­ern­ment.

The na­tional car­rier has lost more than R6.5bn in the past three years, with more pro­jected losses in the past fi­nan­cial year.

When it came to Par­lia­ment with cap in hand MPs de­manded im­proved fi­nan­cial per­for­mance and a strong bal­ance sheet.

But in­sta­bil­ity in the air­line raised ques­tions with MPs say­ing when they re­port in Septem­ber they must pro­vide lead­er­ship.

SAA has al­ready said it would suf­fer a loss of more than R1bn in the past fi­nan­cial year.

Its re­sults will be tabled in the na­tional leg­is­la­ture in due course, and they will give a clear pic­ture of the state of the fi­nances of the air­line.

The Na­tional Trea­sury is ex­pected to an­nounce de­tails of the sale of SAA’s as­sets in the next few months or even in Oc­to­ber dur­ing the Medium Bud­get Pol­icy State­ment.

SAA is also in the process of be­ing merged with Mango and SA Ex­press (Sax) to rein in the losses and im­prove fi­nan­cial per­for­mance.

In his State of the Na­tion Ad­dress in 2015 Pres­i­dent Ja­cob Zuma said the merger of SAA with Sax and Mango would strengthen its bal­ance sheet.

In its re­sults SAA has said high costs of fuel and tough com­pet­i­tive en­vi­ron­ment have also im­pacted on their fi­nan­cials.

SAA has had lead­er­ship in­sta­bil­ity over the last few years, with a high turnover of chief ex­ec­u­tives and the board. The cur­rent board was ap­pointed only late last year. There has been no per­ma­nent chief ex­ec­u­tive since the de­par­ture of Mon­wabisi Kalawe two years ago.

SAA is one of the few sta­te­owned en­ti­ties (SOEs) that has been em­broiled in al­le­ga­tions of wrong­do­ing and in­fight­ing.

The gov­ern­ment has since 2015 been call­ing for bet­ter man­aged and fi­nan­cially sus­tain­able SOEs.

For­mer Fi­nance Min­is­ter Pravin Gord­han warned two years ago that the state has pumped R467bn in guar­an­tees to SOEs and that this was not sus­tain­able.

SAA is one of the en­ti­ties that got most of the guar­an­tees.

PHOTO: BLOOMBERG

The logo of South African Air­ways sits on the tail­fin of an Air­bus Group NV A340-600 air­craft. SAA has been re­ceiv­ing the lion’s share of gov­ern­ment bailouts to­talling R467bn to state-owned en­ter­prises.

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