It’s not clear how the new money for SAA will be raised by the National Treasury at a time when the government is cash-strapped. It’s also not clear if the Treasury will appropriate the required funds from deteriorating public finances. But they have agreed to do it, and that’s a start. Or an end.
The National Treasury has committed to raise more than R10-billion in emergency funding for SAA that is required to restructure the troubled airline, the Department of Public Enterprises said.
The department, which oversees the affairs of SAA as its sole shareholder, said in a statement on Thursday 16 July 2020 that the Treasury and Finance Minister, Tito Mboweni, will support and source funding for the airline’s business rescue plan.
On Tuesday 14 July, SAA creditors voted overwhelmingly in support of the business rescue plan, which immediately requires at least R10.4-billion from the government to fund the restart of the airline’s aviation operations.
The SAA business rescue practitioners, Siviwe Dongwana and Les Matuson, gave the department a deadline of Wednesday 15 July to provide the duo with a letter – concurred by the Treasury – indicating whether the government would commit to funding the airline. The letter, which was signed by Mboweni and Public Enterprises Minister Pravin Gordhan, was sent to Dongwana and Matuson on Wednesday evening.
If the department and Treasury missed the deadline, Dongwana and Matuson would declare the business rescue plan as “unimplementable” and bring SAA closer to liquidation, which implies its death.
The department said it received a letter of support from the Treasury that commits the government “to mobilise funding for the short, medium and long-term requirements, to create a viable and sustainable new South African national airline”.
However, it’s not clear how the new money for SAA will be raised by the National Treasury and Tito Mboweni at a time when the government is cash-strapped. It’s also still not clear if the Treasury will appropriate the required funds from deteriorating public finances.
The letter signed by Mboweni and Gordhan supports a statement on 24 June issued by Cabinet, which supports the launch of a new and restructured SAA that will be funded through various sources, including potential strategic equity partners taking up a stake in the airline.
Dongwana and Matuson can only start to restructure SAA once the government has successfully managed to raise more than R10-billion. This money will be used to fund retrenchment packages to about 2,700 SAA workers, pay the airline’s creditors whose debt is not guaranteed by the government, and provide SAA with start-up capital to resume a full schedule of flights from January 2021.
The department said it expects that “an amount of R10.1-billion will be required to fund the rescue plan, clean up and stabilise the balance sheet of SAA, restructure the rest of the group entities that are not in business rescue, provide working capital for the rest of the group’s entities, and to create a stable and viable platform for a new restructured national airline”.
Treasury’s commitment to fund SAA is a marked shift from its recent hard stance on providing the airline with more bailouts – over and above the R57-billion that SAA has been awarded since 1994.
The Treasury recently said in Parliament that there will be no more bailouts for SAA and the airline should be closed. DM/BM