Carol Paton Writer at Large
Picture: BUSINESS DAY
Picture: BUSINESS DAY

SA Airways (SAA), which has already racked up losses of about R18bn over the past decade, needs about R17bn in government bailouts, or refinancing from banks, in the next three months to continue operations, executives told MPs on Tuesday.

An immediate priority is to persuade banks to lend it R3.5bn by December to ensure it has working capital. Otherwise, it could find itself unable to pay suppliers and staff.

It will need to raise a further R4bn in March, as well as refinance or pay back R9.2bn in maturing loans.

Together with the R5bn that was allocated to the airline in the medium-term budget in October, this will bring SAA’s total funding costs for its turnaround plan to R21.7bn.

The airline has been a drain on government finances for the past decade and has received R60bn in government bailouts over the last 23 years, according to calculations by the Financial Mail. State-owned enterprises (SOEs), mismanaged and looted during Jacob Zuma’s scandal-plagued presidency, have been described by ratings agencies as posing the biggest threat to the sustainability of SA’s finances.

Electricity utility Eskom, which has about R350bn in government guarantees and is regarded as the largest single risk for the economy, is due to release its latest set of financial results on Wednesday.

The battle to turn SAA around has led to calls, most recently by finance minister Tito Mboweni, that it be closed down or sold. Government’s position is that the airline can be saved and put on a sustainable footing to attract an investment partner.

While the turnaround strategy initially envisaged SAA being on a sustainable path by 2020, CEO Vuyani Jarana said the date had now been pushed back by a year due to higher than anticipated fuel prices.

Jarana said that it would not be possible to raise the entire R16.7bn from banks and that more "shareholder support" would be required, with government guarantees no longer enough to entice commercial lenders. "The banks have asked for two things: they want to see SAA on a path to profit and a path to debt reduction. To lower the debt there has to be an equity injection," he said.

Public enterprises minister Pravin Gordhan, who also attended the briefing to the portfolio committee on public enterprises, avoided discussing further financial commitments by the state.

"SAA has its own wish list. They will have to work with the finance minister and myself to get better access to liquidity.

"There needs to be demonstrable evidence that they are achieving better revenue. The banks are not as friendly as they used to be."

Since being appointed to his portfolio, Gordhan has battled to get commercial funders to turn the taps back on. Banks stopped lending to SOEs in July 2017 at the height of the looting.

Gordhan’s initiative to establish "an aggregated loan facility" of R30bn to R40bn from banks to SOEs has not got off the ground, with banks raising _multiple concerns with the plan.