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Cape Town - Both embattled state-owned airline South African Airways (SAA) and the South African Post Office (Sapo) are on the right road to a turnaround, Finance Minister Nhlanhla Nene pledged in his National Budget speech on Wednesday.
He reported to MPs that SAA has already drawn R8bn of the nearly R15bn guarantee provided by the state.
In his budget speech, Nene said government “has … stepped in to address the financial position of South African Airways”. SAA reported a net loss of R2.6bn in 2013/14 “as a result of high operating costs, losses on several international routes and valuation adjustments”.
Said Nene: “We have made guarantees of R14.4bn available to SAA, of which the airline has drawn R8.3bn."
National Treasury director general Lungisa Fuzile reported in the Budget Review that SAA has developed a 90-day action plan to contain its losses. “To date, the plan has produced several results. Loss-making routes to Beijing and Mumbai have been cancelled. To offset the impact of these measures on travel, trade and tourism with Indian and China, SAA has concluded a partnership agreement with Etihad Airways.
“The agreement connects SAA to Abu Dhabi International Airport, expanding its connections to four Chinese and nine Indian cities. In addition three of the eight A340-600 wide-body aircraft leases have been extended at reduced monthly rates.”
Government has also provided Sapo guarantees “subject to implementation of its turnaround strategy”, the minister reported. This involves revised universal service obligations and delivery targets, taking into account the decline in the mail and courier business and the shift to digital communication.
Strike played a part
Post and Telecommunications Minister Siyabonga Cwele has appointed an administrator to lead the Post Office’s turnaround.
Fuzile reported that the Post Office recorded a net loss of R358.9m in 2013/14 after a net loss of R337.1m the previous year. “The losses stem from declining revenues due to lower mail volumes, a high cost base, and a poorly performing mail and courier business as cusomers migrate to digital communications.”
Sapo’s universal service obligations, he reported, which include rolling out new postal services across the country, “have added to its financial pressures, as have strike-related disruptions in 2014.”
Fuzile reported that a R1.7bn going-concern guarantee has been provided in 2014/15 and a R270m guarantee to secure and extend its overdraft facility have been issued “with conditions linked to Sapo’s turnaround strategy”.
