SAA loan: no strings attached
Finance Minister Malusi Gigaba takes flak from economists for capitulating too easily to SAA's demands for a R2.3bn bail-out
Finance Minister Malusi Gigaba took flak from economists on Sunday for capitulating too easily to the demands of state-owned airline SAA for a R2.3bn bail-out without imposing stringent conditions on the cash injection.
With no measures in place to stem the losses at the flagging airline, the need for a further bail-out seemed inevitable, the economists said.
SAA is said to be losing about R370m a month and to be having difficulty in paying salaries. The airline has notched up an unaudited loss of R1,9bn for the year to end-March 2017, up from the previous year’s loss of R1.5bn.
Chairman of Parliament’s standing committee on finance Yunus Carrim also said the committee would want to know from Treasury what requirements it had imposed on SAA in return for the bail-out “to ensure it functioned far more effectively”.
Treasury’s weekend announcement of the bail-out made no mention of conditions, the first of which — according to University of Witwatersrand senior economics lecturer Lumkile Mondi, economist Mike Schussler and DA deputy finance spokesman Alf Lees — should have been the immediate removal of SAA chairperson Dudu Myeni.
Treasury provided the funds to SAA so it can repay its loan to Standard Chartered Bank. SAA’s other loans amounting to about R6.7bn also matured at the end of June but SAA managed to get these rolled over.
Schussler, chief economist at Economists.co.za, said the unconditional bail-out of SAA would create the impression, particularly among credit ratings agencies, that bail-outs for other state owned enterprises were possible. There was no accountability.
“The thing is that there is no great plan in place for SAA to get itself out of its financial problems. We are bailing them out without anything in place, which must be of concern to the ratings agencies. There should be a quid pro quo for a bail-out otherwise in six months' time SAA will be coming for another billion or three.
“I would like to see an approved plan in place, a competent management and a professional board. The minister should have laid down certain minimum conditions when handing out taxpayers’ money.”
Gigaba could say in response that the board is finalising a long-term turnaround plan, the search for a new CEO is under way and the board is up for renewal in September, but Schussler said the minister should have stipulated these processes as conditions when he announced the bail-out.
Efficient Group chief economist Dawie Roodt said he would have thought the new finance minister would have made some kind of statement to indicate the seriousness with which he regarded the bail-out. He handed over the money too easily, Roodt believes.
Mondi said the bail-out was “very disappointing” given the state of the economy, and it would simply prop up the mismanagement of SAA.
Carrim said the finance committee believed Treasury was failing in its oversight role of SAA. He urged that the SAA board be strengthened, Myeni’s position be reviewed, a CEO be appointed, and the board’s turnaround strategy be finalised as soon as possible.