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Cape Town – Finance Minister Malusi Gigaba should urgently clarify the exact amount of equity he intends to inject into cash-strapped national airline South African Airways before he tables his Medium-Term Budget Policy Statement, Alf Lees from the Democratic Alliance (DA) said on Friday.
Lees issued a statement following a report in which Gigaba said local lenders may be willing to extend the deadline by which SAA is required to honour a R5bn debt obligation beyond the end of October to end-March 2019 on condition that he announces an equity injection into the airline when he tables the mini budget on October 25.
Gigaba announced this in a report to Parliament on Friday. In addition, he also notified Parliament of the decision of the use of funds to the value of R3bn to defray expenditure of an exceptional nature currently not provided for.
This is done in terms of section 16(4)(a) of the Public Finance Management Act. Gigaba explains that delaying these funds would have seriously prejudiced the public interest had it been postponed to a future parliamentary appropriation of funds.
Lees said his party notes that Gigaba had met the obligation to report to Parliament on the R3bn bailout National Treasury granted SAA, but added that the report raises some serious questions, which require urgent clarification before the MTBPS is delivered.
“What exactly is the amount that will constitute the 'required equity' that Minister Gigaba refers to in his report? Is it the R 5.2bbn already paid to SAA or the R10bn that Minister Gigaba and National Treasury have recently said would be required in the 2017/18 financial year?”
Gigaba earlier said that SAA had asked the government for R10bn as part of a recapitalisation plan aimed at returning the state-owned carrier to profit. He did not say whether the amount would be granted, or not.
More conditions?
Other concerns the DA has include whether the lenders' condition of required equity injection is in fact the only condition it placed on Gigaba.
“What are the other conditions? Where will the R5bn come from to pay lenders on 31 of March 2019?” Lees asked.
Gigaba’s spokesperson Mayihlome Tshwete told Business Day that the Finance Minister has a plan that will be conveyed fully in the MTBPS. The plan is far advanced and has been discussed with the president and a presidential committee of a small group of ministers, according to Tshwete.
Another question Lees wants clarification on is what assets government plans on selling off if the equity injection into SAA is going to be “budget neutral” as Gigaba claimed earlier.
Telkom announced on Thursday that it had removed its cautionary notice regarding government's plan to sell its 39% stake in the firm (valued at about R13bn). National Treasury said this was because the option to sell this stake to fund the bailout was no longer an option.
"Considering that Telkom withdrew the cautionary issued on the trading of its shares, it is clear that Minister Gigaba, like an aircraft awaiting permission to land, is in a holding pattern of buying time for SAA to temporarily continue flying. The losses, by Gigaba’s own admission, will continue to mount up and will require further cash bailouts within the next two months in order to avoid the liquidation of SAA.”
Lees said the only logical action for Gigaba is to put SAA into business rescue in order to stabilise it and then sell it to the highest bidder.
Government however has repeatedly stated that privatising SAA is not an option.
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