Pravin Gordhan puts SAA on notice to get on with turnaround plan

Public enterprises minister Pravin Gordhan has warned loss-making SA Airways, which is facing R14bn in debt repayments by March, to implement its turnaround with “a greater sense of urgency”. 

Just three days after outspoken finance minister Tito Mboweni suggested the airline should be closed down, Gordhan’s department said SAA was a ‘‘good airline but a poorly run business’’ and had been set back by corruption and mismanagement. 

‘‘Bad decisions were made by previous boards and management, including allowing corruption to incapacitate the airline,’’ the ministry said in a statement on Sunday.

“Against this background the immediate priority for the ministry of public enterprises is to stabilise SAA financially and through a rigorous process of cost reduction and commercial reorientation, to turn it into an airline that is financially and operationally sustainable.

“Cognisant of the challenges confronting the airline, the ministry will place the board and management on notice to discharge, with a greater sense of urgency and dedication, their professional duties to identify and implement immediate interventions.”

Mboweni’s call for the disbanding of the airline was made at an investor conference in New York on Thursday.

“It’s loss-making. We are unlikely to sort out the situation, so my view would be close it down,” he told delegates at the conference.

The ministry said on Sunday the reforms needed to include “addressing the airline’s cost-base, stopping all fraudulent contracts, disciplining and instituting appropriate civil and criminal actions against all persons inside and outside the business who are implicated in corruption, and preparing SAA for a strategic equity partner in the near future”.

The state-owned entity has struggled to generate a profit since 2011 and had come under fire for putting strain on the fiscus.

It  recorded losses of R5.6bn in 2014/15, R1.4bn in 2015/16, R5.5bn in 2016/17 and R 5.7bn in 2017/18, and is running at a loss in 2018/19. The airline has projected further losses until it breaks even in  the 2020/21 financial year. It has received R10bn in bailouts over the last two financial years and relies on a R19bn guarantee from the state to keep operating.

In October, the medium-term budget policy statement (MTBPS) highlighted that SAA will get a cash injection of R5bn to enable the national carrier to settle its debts.

“The latest MTBPS showed that, firstly, there are no holy cows and, secondly, there is no room for bailouts. What we’re saying to the board is that you don’t have till 2021 to act, you need to act now,” said public enterprises spokesperson Adrian Lackay.