Creditors ‘blindsided’ by SAA’s request for R3.5bn in additional funding

Some SAA creditors have been left feeling confused by the decision of the airline’s business rescue practitioners to ask Finance Minister Tito Mboweni for additional money from the national Budget.

The 2021 Budget Review shows that SAA business rescue practitioners have asked Mboweni for an additional R3.5-billion to fund the restructuring of the struggling state-owned airline.

The latest funding request is over and above the R16.4-billion (of which R10.5-billion was new money) that Mboweni allocated to SAA last year to fully fund its business rescue process, which is more than a year old and is still ongoing.

But the cost of SAA’s business rescue process has now risen from an originally agreed amount of R16.4-billion to R19.3-billion, the National Treasury said in the Budget Review. This means that an additional R3.5-billion has been requested by SAA business rescue practitioners, Siviwe Dongwana and Les Matuson.

At a press briefing after the Budget speech on Wednesday, Mboweni said: “There is no allocation in this Budget for SAA. The business rescue practitioners have made a request for R3.5-billion. That still has to be interrogated to get to the veracity of it.” A Johannesburg-based SAA creditor told

DM168 that the business rescue practitioners have blindsided creditors as they were not informed about the airline’s latest funding request.

“We were in the dark; we only found out about the additional funding request from Mboweni’s Budget. This calls into question the validity of the SAA business rescue plan,” the creditor said.

The original funding requirement of R16.4-billion was already included in SAA’s business rescue plan, which was voted on and approved by creditors in July last year. The plan was later presented in Parliament.

However, another industry insider said the document was no longer valid because the airline’s funding requirements have drastically changed.

In October 2020, Mboweni awarded SAA R10.5-billion in new money to pay the airline’s unsecured creditors and those who leased aircraft to the airline, fund retrenchment packages to 2,000 workers and the airline’s now delayed restart. At the time, Public Enterprises Minister Pravin Gordhan said it was the last time the airline would need financial support from the fiscus. But the airline is back for more money.

The Budget Review has implied that SAA creditors were informed about the additional funding for the airline because its business rescue plan was amended in September 2020. “The identified funding requirement [in the amended business rescue plan] was increased to R19.3-billion. Of this, R14-billion was envisaged to come from the government [including the R10.5-billion allocated in 2020/2021], with the remainder sourced from strategic equity partnerships,” the Budget Review reads.

Writing in the Daily Maverick on Tuesday, Gordhan said his department was “nearing finality with the appointment of a strategic equity partner” that would fund SAA’s future financial requirements and beef it up with technical aviation skills.

The SAA business rescue practitioner’s office was not immediately available to comment about whether the additional funding request of R3.5-billion was disclosed to creditors. It is also unclear why the rescue practitioners need additional funding.

The delays in the completion of SAA’s rescue process mean that the airline could not return to the skies in January – as was proposed by the approved business rescue plan. Most airlines have resumed flights under less strict lockdown regulations.

The cost of SAA’s business rescue process has now risen to R19.3-billion