SAA revival a ‘pie in the sky’

In January, Public Enterprises Minister Pravin Gordhan said that SAA was trading profitably. Less than a month later, National Treasury said the airline lost R50 million during the first three quarters of the 2022-23 financial year.

But the budget tabled on 22 February projected SAA’s losses at R786.7 million, against revenue of R3.8 billion and expenses of R4.6 billion.

The airline didn’t get to the approved business rescue plan’s anticipated revenue of R12 billion and is expected to run at around R200 million losses by the end of the 2023-24 financial year.

Bailout

Finance Minister Enoch Godongwana pledged another R1 billion to SAA during his budget speech. An accountant said that had it not been for taxpayers’ money, SAA may have to answer tough questions about its liquidity.

Aviation analyst Guy Leitch said SAA remained an unviable vanity project.

“There is honestly no case to be made for the continuation of SAA. If the financials are so bad, why should one have any faith in the forecasts for 2024-25?”

According to the National Treasury Budget Forecast, by the 2024-25 financial year, SAA expects to have grown its employee body by 800 people on top of the 1 059 it presently employs.

Expenses are expected to climb parallel to an expected boost in revenue of about 75% in 2023-24 and another near-double that the next year to R13 billion. While SAA expects loss of R236 million in the current financial year, the forecast shows near break-even by 2025.

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SAA growth

Wayne Duvenage of the Organisation Undoing Tax Abuse (Outa) did not buy into the forecast.

“I don’t believe SAA will achieve the growth and revenues budgeted for over the next three years. R13 billion income by 2024-25 from R3.5 billion this year? I doubt it.”

 Leitch pointed out that SAA’s projected negative cash flow, also indicated in the Treasury forecast, made it clear.

“At R3.3 billion negative cash flow, as forecast, the airline is not self-sustaining and is not sustainable without ongoing taxpayer support.”

He also questioned why no provision was made for the R3 billion in working capital that the Takatso Consortium was expected to inject into the business.

Duvenage added: “It appears the plan for a doubling of revenue and expenses for the next two years in a row is a recipe for problems if the strategy isn’t well-informed and clearly implemented.

SOE’s

Given government’s poor track-record in managing complex and competitive businesses, we maintain the state should dispose of the airline and let people who know this game get on with the business of managing SAA.”

The Takatso consortium’s purchase of SAA shares for R51 and R3 billion in working capital over three years remains in the air, heading for its second year since the initial announcement of the group as preferred equity partner.

Takatso said it was anxious for the transaction to proceed and added: “However, we are alive to the fact that completion of the transaction is a process rather than an event.”

 SAA declined to comment and said wait for its annual financial statements. The department of public enterprises did not respond to questions.

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