SAA subsidiaries one step closer to getting R2.7bn lifeline
JOHANNESBURG - The subsidiaries of South African Airways (SAA) are one step closer to getting a R2.7 billion lifeline.
On Tuesday Parliament's Standing Committee on Appropriations (SCOA) adopted a report on the 2021 Special Appropriation Bill, which will make possible the transfer of the R2.7 billion from R10.5 billion allocated to SAA in the mini budget last year.
SCOA also recommended that the National Assembly should adopt the bill without amendments.
According to the committee's report, Mboweni, acting on request from Minister of Public Enterprises Pravin Gordhan, approved a total of R2.7 billion out of the R10.5 billion allocated in the 2020/21 financial year for the SAA business rescue process, to be reallocated to fund payments for financial assets of other SAA subsidiaries.
The bill proposes R1.663 billion for South African Airways Technical (SAAT), R819 million for Mango Airlines and R218 million for Air Chefs.
The bill was tabled by Minister of Finance Tito Mboweni in February and was referred to the committee for consideration and to report to the National Assembly. The committee also held public hearings about the bill.
During the public hearings, aviation economist and chartered accountant Joachim Vermooten argued that the need to foster and "maintain a competitive civil aviation environment" is the underlying objective of the domestic air transport policy, as opposed to a policy of a state-subsidised monopoly.
He believes that the granting of state financial aid to Mango was contrary to the assurances regarding equal treatment of airlines and the role of government in an economically deregulated competitive domestic air transport market.
Furthermore, reprioritising R2.7 billion away from SAA's business rescue plan in favour of the subsidiaries, implied that such an amount would have to be provided to the affected creditors somewhere in the future. This implies that further money would have to be appropriated for SAA at a later stage.
The Organisation Undoing Tax Abuse submitted that the SAA rescue plan does not authorise the diversion of the R2.7 billion allocated to SAA to its subsidiaries. It argued that in line with the Companies Act, the business rescue plan was binding on SAA and the government.
SAA was in business rescue from 5 December 2019 until the end of April this year. The next big step in trying to get a "new SAA" going, is to find a strategic equity partner. Gordhan has indicated to Parliament that an announcement could be expected soon. – FIN24.