Gordhan tells SAA he can’t give them another R10bn bailout

Government has decided not to give the ailing SAA R10 billion, or organise money for it from “foreign sources”, as more funding during its business rescue process.

A letter from Public Enterprises Minister Pravin Gordhan tells the business rescue practitioners that their apparent request for R10 billion must be denied.

In the letter, he responds to a request from business rescue practitioners Les Matuson and Siviwe Dongwana, which came on 2 April, for more money.

He wrote: “Government will not support the extension of the foreign currency borrowing limit to permit foreign financing of the business rescue plan, nor for a care and maintenance budget, as you have proposed. There is therefore no funding available from foreign sources.”

He added that government itself could not help them any more.

“Government is unable to provide additional funding to sustain the business rescue process beyond the funding that has already been provided to the airline in the form of post commencement finance. Further to this please note that neither will lending guarantees be provided in respect of the business rescue process.”

Gordhan said that the advent of the Covid-19 pandemic had “further stretched national resources in government’s effort to mitigate the impact on the health of our people and on economic activity”.

“As you are well aware, the pandemic has been devastating for the airline industry globally, and as we have discussed, the business rescue practitioners must consider their options within their available resources.”

In February, SAA’s creditors and lenders gave the airline’s business rescuers another extension to 31 March to submit their proposed business rescue plan – far more time than is stipulated in the Companies Act.

SAA was placed in “urgent” voluntary business rescue at the start of December and the company then cancelled numerous local and international routes to save cash. It is now operating on a far smaller scale due to the coronavirus lockdown. It is busy repatriating South Africans and dealing with cargo, in the main.

SAA cargo flight landed in SA today carrying essential cargo from Guangzhou, China. This is the first of many cargo flights SAA will be flying.
While the airline is under Business Rescue, it’s very busy flying many stranded SAns & foreign Nationals as well as cargo
📸 @flysaa pic.twitter.com/EzhXzvwgKx

— Heidi Giokos (@HeidiGiokos) April 13, 2020

Later in February, government secured a R3.5 billion loan from the Development Bank of Southern Africa to prevent the airline from being liquidated, but this money was unlikely to last until the end of March, according to the public enterprises department.

SAA hasn’t made a profit since 2011.

On Tuesday, DA MP Alf Lees called on President Cyril Ramaphosa and his Cabinet to shut SAA down and “free the taxpayer from the burden of unending bailouts”.

Finance Minister Tito Mboweni had said in an earlier media briefing on Tuesday that “more clarity on the proposed closure of SAA and SA Express would likely be provided following the Cabinet briefing tomorrow”.

Lees said SAA had been a drag on the fiscus for years “due to billions of rands in unending bailouts”.

“This has not only compromised South Africa’s public finances, it has also taken scarce financial resources away from improving service delivery and investments in public infrastructure.

“Cabinet should therefore walk the talk and put their money where their mouth is by shutting down SAA. Any economic structural reform effort that keeps wasting money on a dysfunctional business entity like SAA will be a betrayal to all South Africans who have to contend with high levels of unemployment and a  floundering economy.”

Oh my gosh! Do they still charge a million Rand for parking when it’s this quiet and eerie? https://t.co/0DiCYqjhf2

— Matshidiso Madia (@tshidi_lee) April 14, 2020

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