State set to re­view its avi­a­tion sec­tor

The Star Late Edition - - BUSINESS REPORT - Siyabonga Mkhwanazi

PUB­LIC En­ter­prises Min­is­ter Lynne Brown has an­nounced that the gov­ern­ment is un­der­tak­ing a re­view of the state avi­a­tion sec­tor and would also soon make pub­lic a strate­gic eq­uity part­ner for SAA and South African Ex­press (SAX), fol­low­ing the merger of the air­lines.

The merger of SAA with SAX has been on the cards for two years since Pres­i­dent Ja­cob Zuma made the an­nounce­ment in his State of the Na­tion Ad­dress in 2015.

The in­ten­tion was to halt the huge losses in the na­tional car­rier and im­prove the bal­ance sheet.

In her writ­ten re­ply in Par­lia­ment this week, Brown said the merger of the two air­lines would still take place. But the gov­ern­ment was also busy with the over­haul of the state air­line sec­tor in the coun­try.

Brown was an­swer­ing questions on the de­par­ture of SAX chief ex­ec­u­tive Inati Nt­shanga last month. Nt­shanga had been with SAX for 13 years and spent the past seven years as chief ex­ec­u­tive.

“Mr Vic­tor Xaba has been ap­pointed to act in the pos- ition of chief ex­ec­u­tive. Now that the po­si­tion is va­cant, I am tak­ing cog­ni­sance of the an­nounce­ment by the min­is­ter of fi­nance in the Bud­get on Fe­bru­ary 22, 2017, that ad­vis­ers are as­sist­ing the gov­ern­ment with a re­view of the state’s avi­a­tion as­sets with the goal of de­vel­op­ing a stronger, more ef­fi­cient and sus­tain­able state avi­a­tion sec­tor,” said Brown.

“The pos­si­bil­ity of con­sol­i­da­tion of SAA with SA Ex­press and in­tro­duc­ing a strate­gic eq­uity part­ner, will be con­sid­ered,” said Brown. Losses How­ever, she would not give dead­lines on the fi­nal­i­sa­tion of this process, and which eq­uity part­ners have been iden­ti­fied for the merger.

SAA and SAX have suf­fered huge fi­nan­cial losses in the past few years, with SAX even fail­ing to ta­ble its fi­nan­cials last year and Brown re­quested an ex­ten­sion from Par­lia­ment.

SAA only man­aged to ta­ble its two out­stand­ing fi­nan­cials af­ter the cab­i­net ap­pointed a new board last year. SAA had over a pe­riod of two years not been able to ta­ble its fi­nan­cials in the na­tional leg­is­la­ture due to dire fi­nan­cial con­straints.

The two fi­nan­cial state­ments showed a com­bined loss of R5.6 bil­lion. SAX also suf­fered a loss of R132 mil­lion in 2004/15 with cu­mu­la­tive losses amount­ing to R733m.

Brown told Par­lia­ment last month that SAX could not re­pay its loans of R510m to Ned­bank and Rand Mer­chant Bank. It was able to pay R58m and they had to rene­go­ti­ate in­stal­ments to pay the bal­ance with the two banks.

SAX is cur­rently oper­at­ing on a guar­an­tee of R1.1bn.

Nt­shanga told Par­lia­ment last year, be­fore his de­par­ture last month, that the merger was in the fi­nal stages and could be con­cluded soon.

This was the point em­pha­sised by Deputy Pres­i­dent Cyril Ramaphosa in the House that dis­cus­sions were at an ad­vanced stage for the con­clu­sion of the merger of SAA with SAX.

How­ever, Ramaphosa would also not give de­tails on the eq­uity part­ner or part­ners they were talk­ing to. He said the de­tails would be made pub­lic af­ter the dis­cus­sions had been con­cluded. There is no in­di­ca­tion how soon the process would be fi­nalised.

The merger be­tween SAA and SA Ex­press will take place as part of the state re­view of its avi­a­tion sec­tor, Pub­lic En­ter­prises Min­is­ter Lynne Brown an­nounced in Par­lia­ment.

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