SAA boss Vuyani Jarana, who has just resigned. Picture: GALLO IMAGES/RAPPORT/ELIZABETH SEJAKE
SAA boss Vuyani Jarana, who has just resigned. Picture: GALLO IMAGES/RAPPORT/ELIZABETH SEJAKE

SAA’s financial troubles sound like the same old story, but they are not. They are worse than ever before.

SAA is essentially in default. It has a R3.5bn loan due, supposed to have been repaid in March, which it has no way of doing. Only the government can bail it out, which it will have to do. But even for that the lenders must wait until parliament reconvenes and passes the Appropriation Bill, so that the money can legally flow from the Treasury.

And that is only the immediate problem. In addition to the R3.5bn, SAA has R9.2bn in debt redemptions that fall due in the next two months. While it and the department of public enterprises are hoping that this will be rolled over, this is far from assured given the recent experience of lenders with the airline.

Choices must be made. The price tag on the turnaround, which has now probably grown,  must be reassessed.

Thirdly, SAA still needs to borrow more — another R4bn — which it needs for working capital for this financial year. With domestic capital markets closed to SAA, the government is looking internationally to access fresh loans, which would be in dollars.

All of these amounts, added to the R5bn which SAA received from the Treasury in October 2018, amount to R21.7bn which is the full funding planned for the turnaround strategy put in place by CEO Vuyani Jarana. The plan, endorsed by the government as a whole, assumes that if the necessary funding is secured then SAA will break even in 2021.

For years now there has been furious debate whether SA needs a national carrier or not. Finance minister Tito Mboweni put the issue into sharp focus at February’s budget briefing when he said he would rather fund trains on which the poor ride than aircraft on which rich people fly.

However, when President Cyril Ramaphosa took over a year ago and appointed Pravin Gordhan as minister of public enterprises, the government did not endorse this point of view. The decision was that SAA would be turned around to prepare it for the sale of a minority equity stake and it remains the country’s majority-owned national carrier.

But although it endorsed the turnaround plan, the government did not fund it. This is the key reason for Jarana’s resignation. Without funding, Jarana knew he would fail. Even if the funding does eventually come through — as the department of public enterprises is promising — Jarana is also aware that the strategy has been undercut, by the uncertainties, which have raised costs for SAA in all its supplier relationships.

Jarana, who was a surprise appointment by a previous finance minister as he did not come from the airline industry, has also hinted that with so little government support, so much red tape in making appointments and such confused lines of accountability and reporting, it is unlikely that the targets in the turnaround plan can still be met.

Now, as government reassesses and tries to entice a new CEO to take on the job, it is time to get real. Choices must be made. The price tag on the turnaround, which has now probably grown,  must be reassessed. This should be compared with the price tag on selling SAA now in its present state and the price tag for shutting it down completely.

Those who want a national carrier for SA must persuade us why this is so important. Will it mean we are cut off from the rest of the world down here at the tip of Africa or will other carriers step in? Or will it mean we look bad in front of our peers? And since we cannot have everything, we want we need to decide: which is more important, is it trains or planes?

Underlying the SAA problem is a theme that runs through the government of Ramaphosa: he wants to have his cake and eat it. Hard decisions are not made, and decisions that are made are unrealistic. They are not followed through, they are not funded; the contradictory elements are brushed over, and rationality does not prevail. We muddle along until next time.

But back at SAA and at Eskom, each time the liquidity squeeze is on it cuts closer to the bone.