SAA gets R1bn allocation to settle outstanding obligations

Chief Financial Officer of the South African Airways Fikile Mhlontlo has welcomed the R1 billion allocation from Finance Minister Enoch Godongwana during the 2023 Budget Speech, that will go towards settling a portion of the outstanding obligations on the implementation of SAA’s 2020 Business Rescue Plan.

SAA was placed under business rescue for a 17-month period, which ended in April 2021.

According to Mhlontlo, the funds will be used to cover outstanding liabilities, specifically those relating to the final dividend payment to creditors and the refund of legacy un-flown tickets to affected passengers – which date back to the period when SAA was placed in business rescue in December 2019.

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SAA no longer insolvent

SAA’s Executive Chairman and Chief Executive Officer Professor John Lamola also confirmed that SAA was no longer insolvent.

“SAA’s operations have progressed positively since the airline emerged from business rescue,” he said.

Mhlontlo added: “SAA has reached a point where we cover our operating costs. It must be emphasised that the allocation announced relates only to historical debt. These funds are not meant to bolster the business plan we are currently executing.”

The allocation of R1 billion is a portion of the initial R3.5 billion that was required by SAA to pay off all debts that the Business Rescue practitioners had segregated into a Receivership.

However, that figure has since been reduced. The total balance expected from National Treasury has been brought down to R2.586 billion.

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Mhlontlo said that the airline will continue to negotiate with National Treasury for the balance of the funds and cooperate with all the conditions that may accompany the flow of these funds.

Mismanagement and corruption

SAA had been facing financial difficulties for many years due to mismanagement, corruption and other factors. The airline had been making losses for a long time, and its debt had been steadily increasing. By the end of 2019, SAA’s total debt was estimated to be around R9.2 billion.

In December 2019, the airline was placed under business rescue. The aim of business rescue was to save the airline from collapse by appointing a team of specialists to take control of the company’s affairs and restructure it in a way that would make it profitable again.