No rating review for SAA

SAA’s long-overdue 2014/15 annual financial statements have finally landed in Parliament on the eve of a crunch meeting between Deputy President Cyril Ramaphosa, Finance Minister Pravin Gordhan and ratings agency Moody’s.

Efforts to bolster governance of key parastatals will be a burning issue at the meeting next week after Moody’s placed five of them – excluding SAA – on review for a credit rating downgrade. SAA’s financial statements – still only in preliminary form pending resolution of “technical issues” raised by the auditors – were tabled only after Gordhan had granted a new R4.7 billion government loan guarantee, without which, he confirmed in Parliament on Tuesday, it would have been technically insolvent. This comes after the airline posted a R4.7bn loss in 2014/15 – reflected in the financial statements – and, as Gordhan confirmed, another R1.6bn in 2015/16.

Though SAA was not included in the Moody’s list of “most sensitive” state-owned enterprises (SOEs) placed on review, nor among those hit by an earlier funding freeze by money manager Futuregrowth, the government’s almost half a trillion rand in government loan guarantees to parastatals is seen as a key risk to its sovereign credit rating.

SAA has now racked up just shy of R20bn in loan guarantees on its own.

While Gordhan repeated the message yesterday following a meeting of the Presidential CEO Initiative that the country was serious about bolstering the governance of state-owned enterprises, the return of Dudu Myeni to the helm of the SAA board – against his wishes and despite her contribution to the airline’s decline – is seen as an indication that he does not have the full backing of President Jacob Zuma.