Draft plan for SAA’s rescue calls for R21bn

• Funds to be used to settle all obligations of the old SAA and capitalise a new state-owned airline

A draft business rescue plan for SAA circulated to affected parties at the weekend says that it will take R21bn to settle all the obligations of the old SAA and capitalise a new stateowned airline.

The plan suggests that the new company will purchase the entire shareholding of the old SAA. The airline’s lenders, whose loans are guaranteed and who are the biggest creditors, are to be repaid in full over the next three years with the R16.4bn that was set aside in the February budget’s mediumterm expenditure plan.

Another R600m, at minimum, will be required to pay concurrent creditors, whose claims are not secured.

In addition to these amounts, the plan states that the government will put a minimum of R2bn into capitalising a new airline. The state will also bear the cost of retrenching many, but not all, of SAA’s 10,000 staff at a cost of about R2bn.

This will not be paid immediately but sometime in the future when the airline has stabilised and perhaps attracted a strategic equity partner.

This would bring the government’s commitment to settling the commitments of the old SAA and recapitalising a new company to R21bn.

Since 2003, SAA has received R31.2bn in cash bailouts from the Treasury, bringing its cost to the taxpayer to more than R50bn over 20 years.

This comes at a time when the government’s fiscal space is severely constrained by the Covid-19 crisis, with economists expecting the budget deficit for 2020/2021 to be about double the government’s projections of 6.8% set out in February.

Finance minister Tito Mboweni, who has sought to wean state-owned enterprises off government funding, is due to present an updated budget later in June.

The rescue plan, which was prematurely leaked on Sunday, is in draft form and has not been finalised or put to a vote of creditors. It achieves the aim set out by public enterprises minister Pravin Gordhan and the ANC of restructuring the airline and retaining it as a national flag carrier.

It assumes that the necessary funding from the fiscus will be

forthcoming. “Government, as the sole shareholder of the company and acting through the department of public enterprises, supports a business rescue that results in a viable and sustainable national flag carrier that provides international, regional and domestic services,” the plan states.

Although the draft plan states unequivocally that “the government has agreed to fund the proposed restructure”, the department of public enterprises said on Monday that “the government has not discussed the plan yet and no decisions have been taken on some of the proposals it contains”.

The draft plan has been prepared by the business rescue practitioners and is meant to be discussed by various stakeholders including creditors, employees and government.

The Treasury referred all queries to the department of public enterprises.

The government has previously said that it would provide no more funding for the restructuring of SAA.

This was confirmed in an April letter from Gordhan to the business rescue practitioners.

However, Gordhan has said that it was his intention to first finalise a plan and then to see about raising the necessary funding.

In an exchange with the SA National Editors Forum on Sunday, President Cyril Ramaphosa indicated that he supported the rescue plan.

The department of public enterprises made reference to Ramaphosa’s favourable statement as an indication of wider and heftier government support for the plan.

“The government has embraced the restructuring process as part of a path to a new, dynamic and financially viable airline that will serve SA’s economic and strategic interests.”

R2bn the cost that the state will bear for retrenching many, but not all, of SAA’s 10,000 staff