Treasury flies to SAA's rescue with emergency R2.2bn injection
The Treasury has given SAA an emergency bailout so it can repay a R2.207-billion loan from Standard Chartered Bank.
Saturday’s announcement followed the UK bank’s rejection of a request by the troubled airline to extend the loan facility‚ which matured on Friday.
A week ago‚ SAA sources told the Sunday Times of a two-month struggle to find the money‚ with the board sometimes meeting up to three times a week to discuss the issue.
The Mail & Guardian reported that SAA chairman and close Jacob Zuma confidante Dudu Myeni had missed about eight board meetings since April. This had led board members to seek legal advice on how to proceed in Myeni’s absence.
Under former finance minister Pravin Gordhan‚ the Treasury appointed a new SAA board in September to try to boost yet another turnaround plan for the airline.
Saturday’s statement from the National Treasury said funds had been transferred to SAA from the National Revenue Fund.
“This payment was done in terms of section 16 of the Public Finance Management Act. This section of legislation states that the (finance) minister (Malusi Gigaba) can authorise the use of funds to defray expenditure of an exceptional nature which is currently not provided for and which cannot‚ without serious prejudice to the public interest‚ be postponed to a future parliamentary appropriation of funds.”
The Treasury said a default by SAA would have triggered a call on the government guarantee‚ leading to a depletion of the National Revenue Fund in any event and “possibly resulting in elevated perceptions of risk related to the rest of SAA’s guaranteed debt”.
This week the Treasury said around R9-billion rand of SAA debt was maturing at the end of June‚ with six or seven lenders involved.
On Saturday‚ it said several options were being explored to recapitalise SAA and an update would be provided in Gigaba’s medium term budget policy statement in October. “Given the nature of the problems at SAA‚ section 16 of the Public Finance Management Act (which covers emergencies) has to be used as the last resort.”
The statement added: “Government will do everything in its power to ensure that the airline’s turnaround strategy is implemented. The airline remains a strategic asset and in its role as the flag carrier it serves as an economic enabler with direct and indirect benefits across a wide range of economic activity.”
SAA has been surviving by borrowing to service debt or extending loan terms — which was a major reason it spent R1.2-billion on interest payments‚ according to its latest financials.
However‚ Standard Chartered was put off by recent political developments and by policy uncertainty flagged by ratings agencies.
DA MP Alf Lees said the announcement was a blow to the credibility of both the SAA board and to National Treasury.
"Only three days ago when I asked National Treasury whether they were ready to meet the guarantee obligations both SAA and National Treasury reassured the parliamentary standing committee on finance that the plans were in place to meet the SAA loan payments by the 30th of June 2017. This was clearly not the case‚" said Lees.
"Standard and Chartered Bank evidently have no faith in the leadership‚ management and strategy of South African Airways. This emergency funding for SAA indicates the serious crisis that SAA has been mismanaged into‚" said Lees.
"This taxpayer bailout makes no difference to the cash crisis at SAA. SAA is losing in the region of R370 million every month and is apparently scratching for cash to pay salaries‚" he concluded.