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Johannesburg - South African Airways (SAA) seemingly did not play open cards with Parliament about the full extent of its financial crisis.
In a written reply to a parliamentary question, Finance Minister Malusi Gigaba showed that SAA back in March asked the government for R10bn as part of a recapitalisation plan, in an appeal to Treasury to help the airline recover.
At the time Parliament was presented with different figures, which painted a far rosier picture than the true state of the state carrier’s dismal financial affairs. Gigaba did not say whether he had granted SAA’s request for a R10bn bailout, stating only that the SAA board had approved the recapitalisation plan.
SAA's latest request for financial aid comes after Treasury already forked out R2.207bn in June for a bailout after Standard Chartered Bank said it was not prepared to extend loans of R 2.207bn to SAA beyond June 30.
Alf Lees, Democratic Alliance shadow deputy minister of finance, said SAA board chair Dudu Myeni and the chief financial officer of SAA failed to inform Parliament’s standing committee on finance of this when they appeared before the committee on June 27 2017, despite knowing what was going on.
He said Parliament had been misled on two occasions about the extent of liquidity problems at SAA and its projected losses.
Lees said Gigaba’s reply showed that SAA, which hasn’t made a profit since 2011, had been aware as early as April 2017 that Standard Chartered Bank would not extend the loan.
Last week Gigaba wrote to Speaker Baleka Mbete to inform Parliament about where money for a bailout would be found. In the letter, he said that SAA has to pay lenders R15.963bn in 2017.
The R2.207bn bailout was a part of this total amount, which was given to SAA to settle its debt with Standard Chartered Bank through an emergency guarantee on June 30.
Selling off assets
Another R13.755bn still has to be paid, Gigaba's letter last week stated. But SAA does not have the cash.
READ: Gigaba could target R14bn Telkom stake for massive SAA bailout
This is because Gigaba revealed that SAA has already used R18.624bn of its R19.144bn government guarantee allocation. This means government has to find the above cash elsewhere for the state-owned airline, which is bleeding R370m of losses every month.
In his letter, Gigaba revealed that “government is currently identifying assets for disposal to offset the expenditure incurred and render the operation neutral in respect of the current year’s budget balance”.
Gigaba’s reply also shows that SAA already on September 30 2016 projected that an additional R2.5bn would be required, simply to continue trading until March this year and to prevent the liquidation of the airline.
The minister wrote that at the SAA board meeting of September 30, the board was apprised of the immediate and short-term liquidity risks facing the company. It was also informed of the short-term facilities that were maturing in the ensuing six months from the time to the value of R4.3bn, with R4bn which matured in December last year and R300m maturing in January 2017
The board was informed that the working capital requirement was quantified at R2.5bn up to the financial year-end in March this year.
Yet when the state carrier appeared before the finance committee that same month, it said its losses for the 2016/17 year would only amount to R 1.7bn.
“It appears that the SAA board accepted that SAA would run at a loss of R 2.5 bn for the six-month period,” Lees said.
This amounts to R 416.7m per month or R 13.7m every day for six months.
“The latest losses of R 4.5bn for the 2016/17 indeed confirm this,” he said.
Gigaba said SAA asked the lenders for a “package solution” to keep afloat, and managed to strike a deal with lenders to extend the short-term facilities.
“Regarding the additional R2.5bn for working capital, the lenders set milestones that needed to be fulfilled or met before a drawdown of each tranche,” Gigaba said.
Therefore, the short-term facilities of R4.3bn plus R2.5bn for working capital and an R830m facility which totals to R7.6bn were then extended to April 30 2017.
“The agreement with the lenders was to repay on April 30 2017 once the turnaround and business plans were done.”
Gigaba said the SAA board submitted a one-year corporate plan in March, asking for the R10bn because they were aware the deal they had struck to pay the lenders by the end of April would not be met.
On April 10 2017, SAA received a letter from Standard Chartered Bank informing it that the loan would not be extended; Gigaba said this was communicated to him.
More negotiations ensued and Standard Bank agreed to extend the deadline to June 30, when Treasury granted the bailout.
Gigaba said there have been weekly meetings between Treasury, SAA and the lenders to keep the lenders informed.
Lees said he would ask Gigaba to provide details on reasons why SAA failed to inform Parliament in June that Standard Chartered had refused to extend the loan.
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