Control of SAA is given back to public enterprises
Pravin Gordhan’s department will now control the ailing airline, after the president transferred its control, effective August 1
Embattled national airline South African Airways (SAA) has reverted to the Department of Public Enterprises after reporting to the Treasury for almost four years, according to a presidential proclamation gazetted on Wednesday.
SAA is in a dire financial state and is looking for a buyer to acquire a stake in the airline as it seeks to cut losses.
In July, the company said it had met airlines with which it had code-sharing agreements, as well as potential commercial partners, but had not discussed any possibility of them investing in SAA as part of a strategic equity partner process.
In 2015, a R2bn equity deal between Emirates and SAA was scuppered when then SAA chairwoman Dudu Myeni intervened and ordered then acting CEO Nico Bezuidenhout not to sign the deal.
SAA needs to raise R21.7bn over the next three years to make it profitable, according to the airline’s turnaround plan. That amount would be part equity — either from the government or a new investor — and part debt.
Four years ago, the Cabinet approved the transfer of SAA from the Department of Public Enterprises, which was then headed by Lynne Brown, to the Treasury under Nhlanhla Nene.
Brown was dropped when President Cyril Ramaphosa announced his first Cabinet early in 2018, replacing her with former finance minister Pravin Gordhan.
Gordhan has been at the forefront of cleaning up the state-owned entities under his department, changing public servants and boards and removing tainted managers implicated in state capture.
The presidential proclamation was signed by Ramaphosa and the two affected ministers on July 25. It reads: “In terms of section 97 of the Constitution … I hereby transfer the administration, powers and functions entrusted by the South African Airways Act, 2007 and all amendments thereto, from the minister of finance to the minister of public enterprises, with effect from August 1 2018.”
Gordhan said his department was well placed to consider strategic alignment and synergies between SAA and SA Express. “I have had a joint meeting with the chairs and deputy chairs of both airlines and we will now start the process of formalising a joint board committee to give effect to this strategic alignment and operational consolidation,” he said.
Last monthIn July, the South African Civil Aviation Authority (Sacaareinstated SA Express’s air operator certificate (AOC)‚ clearing the way for the airline to resume operations.
SA Express’s AOair operator certificate and aircraft maintenance organisation certificate approvals, as well as the certificates of airworthiness for nine of its 21 aircraft were suspended on May 24 following an audit conducted by the South African Civil Aviation Authority, which uncovered severe cases of noncompliance that posed serious safety risks.
In a joint statement, Nene and Gordhan said the transfer of SAA to public enterprises followed a study commissioned by the Treasury and the department to develop optimal group structures for the carrier’s assets. They said the recommendations from the study, if considered appropriate, could require implementing changes to the group structure of SAA.
“As the executive authority for other major state-owned companies, including SA Express, the minister of public enterprises is best placed to be the custodian of all of the state’s aviation assets.” The assets are SAA and its subsidiary, Mango, and SA Express.
The DA said transferring SAA would make no difference to its fortunes and would not make it profitable. “SAA will still require taxpayer bail-outs of R5.45bn in 2018, R5.18bn in 2019 and R1.93bn in 2020 to fund the ongoing SAA losses that the turnaround strategy includes,” DA shadow deputy minister of finance Alf Lees said.
“These losses exclude the losses from the bankrupt SA Express that simply add to the demands on taxpayers for bail-outs of the state-owned aviation ‘liabilities’.”
Lees asked that the study be made public.