After the Treasury meets the new board of SAA, it will pronounce on its plans to consolidate aviation assets and bring in a strategic equity partner, Minister of Finance, Malusi Gigaba said today, as he delivered the country’s Medium Term Budget Policy Statement.
“We believe a strategic equity partner can play an important role in SAA’s turnaround, as well as unlocking value for the fiscus which has invested significantly in the airline over the years.”
Despite its current challenges, government remains convinced that retaining a national carrier, is in the public interest, the Minister added.
“It is in our national interest, to have influence over our connectivity to all parts of the world, and not have to rely exclusively on the profit and scheduling considerations of global airlines.
“SAA sells South Africa’s economy, tourism and culture to every one of its passengers. Global airlines do not, and will not, perform this priceless marketing and branding role for us.
“So let us not ignore the contribution SAA is making to our nation’s development, even as we insist on dramatic improvements in its governance, strategy and operations.”
Government has issued a R19.1 billion guarantee facility to SAA to ensure the company continues to operate as a going concern.
“Total recapitalisation of R10 billion will be provided in 2017/18. An amount of R5.2 billion has already been provided, with the remaining R4.8 billion to be transferred by 31 March 2018,” the MTBPS confirmed.
“These funds will be used for working capital and to settle debt, enabling the airline to reduce its interest expenses. Even after the capital allocation, government’s exposure to SAA debt remains significant at R15 billion. There is risk that if SAA’s financial fortunes do not improve, there will be further calls on the remaining guarantee.
“A new, full-strength board has been tasked with returning the airline to financial sustainability. The appointment of a permanent chief executive officer, who will start on 1 November 2017, is a critical step in ensuring that the airline’s turnaround strategy is aggressively implemented. If SAA executes a successful turnaround in line with its projections by 2019/20, its reliance on guarantees will subside, as will government’s risk exposure.”
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