SAA situation shows damage done to good people’s lives by people such as Dudu Myeni
If SAA and its associated 10,000 jobs or so are to be saved, the airline must be put into business rescue without delay
My son and daughter-in-law recently flew to and from New York on SAA flights to attend my nephew’s wedding in Elkhorn, Wisconsin. They reported that they had a very pleasant and comfortable trip with excellent service from the cabin crews.
Listening to them I was reminded of the extent of the damage done to good people’s lives by people such as Dudu Myeni, the previous SAA board chair, and the effect malfeasance has had on the future prospects of good people in SAA, like the cabin crews on those flights to and from New York.
SAA has consumed R31.4bn in “bailouts” that could have been used to stimulate the economy and create jobs. The bailouts started immediately after SAA was unbundled from Transnet in 2007 and have exploded in the past two years. SAA has been paid cash of R700m in 2007, R1.6bn in 2010; and a staggering R10bn in 2017.
Late in the evening of November 28, parliament approved a further R5bn cash bailout for SAA. None of this huge amount will be used to buy new aircraft or even to pay for jet fuel or salaries. All will go straight to the banks and financial houses that have already lent the R5bn to SAA, which has already spent all R5bn.
In reality SAA has managed to divert R5bn from service delivery to poor South Africans. Banks and other finance institutions have been complicit in this extortion. They lent R5bn to SAA knowing it was running at massive losses and had no way of repaying the banks by November 30.
At the end of September 2018 SAA had racked up losses of R2.2bn and forecast a loss of R5.3bn for the full 2018-2019 financial year.
Now we are told SAA will be forced into liquidation if it does not receive another R3.5bn between now and the end of March 2019 to fund ongoing operational losses.
SAA cannot continue to be a drain of desperately needed money for poor South Africans. A line must now be drawn in the sand.
Parliament was told by SAA that borrowing this additional R3.5bn from the banks was not possible as the banks required additional commitments. Unless the finance minister gets his way to shut down SAA, which seems unlikely, there are two clear options the ANC government is likely to consider.
One would be to misuse section 16 of the Public Finance Management Act to pay R3.5bn directly from the National Revenue Fund, as Malusi Gigaba did in 2017 when he paid SAA R5.3bn. The second option would be to raid government pensioners' funds and get financing from the Public Investment Corporation (PIC) as it did for Eskom in early 2018. Of course, we should not forget the 2017 secret cabinet memo option of selling Telkom shares.
Right now, SAA is insolvent and is trading recklessly. Under the present circumstances it will not be possible for the board and management to stand any chance of nursing SAA back to profitability. They are spending all their time jumping from one funding crisis to the next with the false hope that taxpayers, like some rich uncle, will provide the R21.7bn SAA says it will have to have in order to possibly — no guarantees — return SAA to profitability.
The auditor-general has apparently refused to accept that SAA is a going concern, and the SAA annual report is now two months overdue. Even with the latest R5bn bailout, SAA can still not be assumed to be a going concern as it needs another R3.5bn just to trade until the end of the current financial year March 31 2019.
SAA cannot continue to be a drain of desperately needed money for poor South Africans. A line must now be drawn in the sand. The liability to the taxpayer must be limited to the foolish government guarantees of R16.8bn already issued by the ANC, and not a cent more.
If SAA and the associated nearly 10,000 jobs are to be saved, the airline must be put into business rescue without delay. It will take robust action to cancel corrupt contracts and right-size operations and employee costs, to prepare the airline for privatisation and recovery.
• Lees is DA deputy finance spokesperson and a member of parliament's standing committee on finance.