SAA will receive a further R4,8bn from government by March 31, 2018.
In September, National Treasury Director General Dondo Mogajane told MPs that Treasury had agreed to give SAA a special appropriation of R10bn by the end of September. Deputy President Cyril Ramaphosa further told the National Council of Provinces that any funds being considered to help address SAA’s maturing debt would have to be appropriated through a “special appropriations bill that will be introduced to Parliament”.
Despite this, Finance Minister, Malusi Gigaba, told Parliament today (October 25) that Treasury would offer SAA a total recapitalisation of R10bn, R5,2bn of which has already been provided, with the remaining R4,8bn to be transferred by March 31, 2018.
“These funds will be used for working capital and to settle debt, enabling the airline to reduce its interest expenses,” Gigaba told the National Assembly during his maiden Medium Term Budget Policy Statement (MTBPS).
South Africa’s tax revenue was projected to fall short of the 2017 budget estimate by R50bn in the current year – the largest downward revision since the 2009 recession, Gigaba said. He admitted that additional appropriations of R13,7bn to recapitalise SAA and the South African Post Office had contributed to this offset. “Thus, to ensure the expenditure ceiling is not breached, we have decided to dispose a portion of government’s Telkom shares,” Gigaba announced, adding that government had the option to buy their shares back later.
But even after this capital allocation, government’s exposure to SAA debt remains significant at R15bn, Gigaba admitted. “There is risk that if SAA’s financial fortunes do not improve, there will be further calls on the [R19,1bn guarantee government has issued to SAA], however if SAA executes a successful turnaround in line with its projections by 2019/20, its reliance on guarantees will subside,” Gigaba said.
The appointment of a new permanent CEO and a new board were critical steps in ensuring that the airline's turnaround strategy was aggressively implemented, Gigaba added.
With regard to rumours of a merger between SA Express and SAA, Gigaba said he would announce plans to consolidate aviation assets and bring in a strategic equity partner once he had met the new board of SAA.
“Despite its current challenges, government remains convinced that retaining a national carrier is in the public interest,” Gigaba concluded.
