SAA and SA Post Office receive combined R3.4bn bailout

State-owned airline SAA and the technically insolvent SA Post Office have been allocated a combined R3.4bn in bailouts in this year’s budget while the government has prioritised stabilising Eskom and the worsening energy crisis by embarking on a R254bn debt relief programme for the embattled power utility over the next three years.

The money for Eskom, which will be disbursed in three tranches until 2025/2026, is one of several measures to ease load-shedding and ease the pressure on its its balance sheet so that it can, among other things, increase maintenance on its old and unreliable coal-fired plants.

“R337bn of Eskom’s debt is already government guaranteed. Explicitly taking on this debt will reduce fiscal risk and enhance long-term fiscal sustainability,” finance minister Enoch Godongwana said.

SAA’s R1bn bailout has been allocated for historical debt as the airline pushes ahead with taking the Takatso Consortium — which will own 51% of the airline — as its strategic equity partner. The amount is in addition to the R16.4bn granted to SAA to complete its nearly two year-long  business rescue process, which it exited in 2021. 

However, there remains an outstanding R2.4bn in required allocations from the government for the airline to pay its historical debt before the transaction with Takatso can be finalised, along with other approvals from competition authorities.  

“Additional funding is to be considered subject to strict conditions to allow the strategic equity partnership deal to be finalised. As a condition of such funding, all government guarantees to SAA will be cancelled,” the treasury said.

“The allocations for these state-owned companies will be accompanied by strict conditions to ensure sustainability, accountability and transparency. If the conditions are not met, the money will not flow,” Godongwana said.

The Post Office has been allocated R2.4bn as the state-owned postal service prepares to close numerous branches and retrench 6,000 workers over the coming months.

The bailout will be used to reposition the Post Office as a communication service that is on par with its digital and more efficient private competitors, which have eaten into its traditional consumer base in recent years as its finances and operations deteriorated.

“The department of communications and Digital Technologies should ensure that a clear plan is developed and implemented to address the issue of 6,000 Post Office workers who are about to lose their jobs; and that the issue of statutory payments, such as to the Unemployment Insurance Fund (UIF), medical aid schemes and pension funds, is also addressed,” the treasury says in the budget documents.

“Failure to transfer statutory payments is unacceptable and consequence management must be implemented immediately. A progress report should be provided in this regard in the next budget cycle.”

The state capture commission, headed by chief justice Raymond Zondo, found that state-owned enterprises (SOEs) including Transnet, Denel and SAA were at the heart of state-sponsored looting that saw the companies robbed billions of rand for the benefit of a corrupt politically connected few individuals and businesses.

Though the government has begun work to recover the money, such as instituting legal action against those implicated, the financial position of many SOEs remains unsustainable and they rely on regular bailouts to keep operating, placing severe strain on the fiscus.

In the decade to the end of 2021/2022 fiscal year, various SOEs received a cumulative R266.6bn from the government.

“Many state-owned companies remain unable to adequately fund their operations and debt obligations, and are even less able to optimally invest in infrastructure. Underspending on capital projects may in turn undermine broader economic performance,” the treasury says.

As a result, the treasury plans to publish a set of conditions for managing bailouts to SOEs by March “to reduce fiscal risks and promote long-overdue reforms”.

“It [the SOE conditions] aims to link bailouts of these entities to a range of reforms needed to make them sustainable and efficient,” the treasury says.

maekot@businesslive.co.za