Treasury throws R3bn at SAA to avoid costly Citibank default
In a statement on Friday the Treasury said the money will be transferred from the National Revenue Fund to help SAA with its "immediate working capital requirements"
The government has again come to the rescue of the financially crippled South African Airways (SAA) with a bailout of R3-billion.
SAA will repay its Citibank debt of R1.8-billion and will use the rest as working capital.
In a statement on Friday the Treasury said the money will be transferred from the National Revenue Fund to help SAA with its “immediate working capital requirements” and to avoid defaulting on their Citibank loan.
“This payment was done in terms of section 16 of the Public Finance Management Act. This section of legislation states that the Minister can authorise the use of funds to defray expenditure of an exceptional nature which is currently not provided for and which cannot‚ without serious prejudice to the public interest‚ be postponed to a future Parliamentary appropriation of funds. The due process laid out in the legislation will be followed.
“A default by the airline on the R3-billion would have triggered a call on the guarantee exposure totaling R16.4- billion‚ leading to an outflow from the NRF and possibly resulting in elevated perceptions of risk related to the rest of SAA’s guaranteed debt.”
“...Given the nature of the problems at SAA‚ section 16 of the PFMA had to be used as the last resort.”
TimesLIVE previously reported that SAA owed nearly R7-billion. It was recently ordered to pay back R1.8-billion to Citibank by September 30‚ just two months after receiving a government bailout of R2.3-billion to pay back money owed to Standard Chartered Bank.
In August SAA announced its intention to make changes to its network as part of a newly developed five-year plan to bring financial sustainability to the airline.
“The airline remains a strategic asset and in its role as the flag carrier‚ it serves as an economic enabler with direct and indirect benefits across a wide range of economic activity‚” Friday's statement said.
SAA’s new chief executive‚ Vuyani Jarana‚ is starting work on November 1 on a five-year contract.
“Further appointments to fill other critical executive positions will follow shortly‚” the statement said.
As part of the airline’s turnaround plan‚ SAA said this week that daily flights from Johannesburg to Port Elizabeth have been slashed by half to only two a day‚ while domestic flights to East London have been reduced from three to two a day. Flights to Angola’s capital Luanda and Kinshasa in the Democratic Republic of Congo were also trimmed‚ while routes to the cities of Brazzaville‚ Pointe-Noire and Libreville — with connections onward to Cotonou and Douala — are under review.