SAA will have debt and interest payments taken care of
SAA fared best of the SOEs in terms of budget support, other than Eskom, which was already placed on life support in 2019’s budget
“The sword of Damocles has now fallen on us,” finance minister Tito Mboweni said in his budget speech to parliament on Wednesday, referring to the inevitable crash landing of SAA after years of losses and bailouts.
SAA fared the best of the state-owned enterprises (SOEs) in terms of budget support, other than Eskom, which was already placed on life support in 2019’s budget with a huge R150bn bailout to spread over 10 years.
Mboweni said he did not intend to say much about Eskom as “this was an old story” but when it came to SAA, the inevitable had come to pass as the airline had been placed in business rescue. The proverbial sword of Damocles — which he referred to in 2019 — had fallen.
SAA will have both its debt and interest payments taken care of and will receive additional support to fund its restructuring. This means that SAA will receive R16.4bn to cover the repayment of debt and interest costs. This includes R9.2bn of historic debt owed to commercial banks as well as another R2bn borrowed from the consortium to fund the business rescue process. In January, SAA also received an emergency loan of R3.5bn from the Development Bank of Southern Africa.
In addition to the debt repayments, there is also additional allocation for interest payments over the period, bringing the total over the three-year period to R16.4bn. The amount that SAA will receive to fund the remainder of the business rescue process was not quantified in the budget.
In his speech to parliament, Mboweni — whose private view that SAA should be sold outright is well known — said that business rescue “would lead to a radically restructured airline”.
“The associated restructuring costs will be reprioritsed within the budget,” he said.
Eskom, which was allocated R23bn a year for the next decade in the 2019 budget, will now receive these allocations over seven years rather than 10, due to the front-loading of the allocations, which began in 2019.
This means that although Eskom does not receive additional resources in the 2020 budget, it will nonetheless receive substantial support of R112bn from the fiscus over the three-year budget period. This includes the R23bn allocated over the medium-term period as well as additional appropriations that were announced during 2019, which allocated another R33bn for 2020/2021 and an additional R10bn in 2021/2022.
A table in the Budget Review reveals that from 2008 until the end of 2022/2023, the government will have bailed out SOEs to the tune of R291bn. The vast bulk of this has gone to Eskom — R244.7bn — with SAA in second position with a total bailout package over the 15-year period of R38.4bn.