SAA gets another R10.5bn government bailout to restructure

SAA rescue practitioner Siviwe Dongwana has confirmed receipt of a letter from government committing to R10.5 billion in funding to restructure the airline.

The time-lines for the funding will be determined in the following weeks, the business rescue practitioners (BRPs) said, after which they will engage with government on securing the money.

Dongwana said that National Treasury supports the government’s decision.

This followed after the BRPs called a meeting on Friday to discuss the future of the airline, after the money necessary to fund the business rescue process had not been secured on Thursday, 17 September 2020.

The department of public enterprises (DPE) has also called on SAA employees and creditors to be patient “while work continues to find a constructive outcome to challenges at the airline”.

“The department is aware of a creditors meeting called to discuss the future of the business rescue plan for South African Airways and protests scheduled to be held outside the airline’s offices on Friday. Efforts to locate funding sources continue. The DPE remains sympathetic and deeply mindful of the plight of SAA employees,” the department said.

In charting a way forward, the DPE believes critical to solving the difficulties facing SAA is:

• the finalisation and implementation of the business rescue process,
• followed by the start of a restructured airline, appointment of a new board and executive team,
  and
• securing a credible strategic equity partner who can introduce the required technical, financial, and operational expertise into the business.

In a statement on Thursday, the department said government is working with transaction advisors to assess proposals from several potential strategic equity partners for the airline.

“The department recognises the interests of workers’ and creditors.”

Meanwhile, the Democratic Alliance (DA) said yesterday that the meeting should have had one item on the agenda: the groundwork to begin the liquidation of SAA.

If President Cyril Ramaphosa’s government is serious about structural economic reform, the liquidation and closure of bankrupt entities such as SAA is a good place to start, the DA said.

“It has become clear by now that no one is coming to rescue the bankrupt SAA,” the party said in a statement.

“Quite clearly the promises made to SAA creditors on 14 July 2020 by the Minister of Public Enterprises, Pravin Gordhan, and the Minister of Finance, Tito Mboweni, that the additional funding of R10.4 billion over and above the R16.2 billion taxpayer bailout already budgeted for was wishful thinking and they have not been able to find any suckers willing to provide the R10.4 billion funding required to attempt the resuscitation of the ‘dead duck’ SAA.

“Ministers Gordhan and Mboweni would seem to have only one option left to them and that is to include a further taxpayer bailout in the Medium-Term Budget Policy Statement (MTBPS) in October 2020.”

The party said it had information that:

• The Department of Public Enterprises has made a formal application to the National Treasury for the R10.4 billion required to bail out SAA as required by the Business Rescue Plan;
• Before the creditors make any decisions on Friday, 18 September 2020, Minister Gordhan will make a plea to the creditors to extend the life of the Business Rescue Plan to about 21 October 2020, the date of the MTBPS. This request will probably be motivated on the basis that negotiations with funders are at an advanced stage without divulging that the funders will yet again be taxpayers;
• The creditors who have nothing to lose and some, such as the employees have everything to gain, will agree to such a further extension;
• Minister Mboweni and National Treasury have not agreed to this taxpayer bailout being included in the Medium-Term Budget Adjustments;
• The ANC will instruct Minister Mboweni to include the R10.4 billion bailout in the MTBPS and Mboweni will have no option but to capitulate; and
• The ANC will ensure that taxpayers are burdened with increased sovereign borrowings and associated interest costs to pay back.

This is a developing story which will be updated as more information becomes available.

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