PIC suggested as equity partner for bleeding SAA
DA’s Maynier horrified at idea that pensioners’ money might be used to bail out sick airline
The Treasury has suggested that the Public Investment Corporation (PIC) could become the public equity partner in loss-making South African Airways.
This was one of several options being considered, acting Treasury director-general Dondo Mogajane told the finance committee on Wednesday.
His statement follows that of Finance Minister Malusi Gigaba in the National Assembly last week that an equity partner for the state airline need not necessarily be from the private sector. Gigaba emphasised that the government still had to decide whether to introduce a minority equity partner.
The state’s airline assets include SAA, South African Express, Mango and a 2.5% share in SA Airlink.
The possibility that the PIC, which invests funds on behalf of the Government Employees Pension Fund, could be the public equity partner under consideration drew opposition from DA MPs, who protested that pensioners’ money would be sunk into a loss-making entity.
"If that is what they are saying, I find it frankly terrifying that Treasury would even consider using pensioners savings to bail out SAA, which is a serial loss-making, failing state-owned company that has no prospect of becoming profitable or sustainable, ever. That is in my view a terrifying red line," DA finance spokesman David Maynier said.
Mogajane appeared before the committee along with Deputy Finance Minister Sifiso Buthelezi, SAA chairwoman Dudu Myeni and SAA executives and board members.
He said the Treasury would have to look into the available options to see if they made sense. Other initiatives under consideration were for lenders to take over current debt, an equity injection by government, the repatriation of R1bn held offshore which was owed to SAA and cost containment. The Treasury has taken a decision to recapitalise SAA over the next three years, albeit within the context of a constrained fiscus.
Consultancy firm Seabury was employed to evaluate SAA’s long-term turnaround strategy, at a cost of $4.5m, and has concluded that the financially troubled airline will only return to sustainable profitability in 2019-20 and to a positive operating cash flow position by April 2018. SAA is forecast to make a R4.8bn loss for 2016-17.
"Cost and revenue initiatives amounting to about R6.8bn over a five-year period have been identified. [And] R2.88bn of these are expected to be realised in the 2017-18 financial year," acting SAA CEO Musa Zwane told MPs.