SAA has only itself to blame for investors' loss of confidence - DA | Fin24
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SAA has only itself to blame for investors' loss of confidence - DA

Aug 25 2017 14:40

Cape Town - Alleged claims by Finance Minister Malusi Gigaba that revelations by the Democratic Alliance about a South African Airways (SAA) bailout have tanked negotiations are disingenuous at best and grossly misleading at worst, said the party.

According to the DA's finance spokesperson Alf Lees, Gigaba reportedly said that a statement by Lees that a R10bn recapitalisation of SAA is on the cards "has blown the negotiations" and caused SAA to lose its leverage.

In a confidential Cabinet memo distributed to members of the executive, Gigaba proposed that government sell its close to 40% stake in Telkom to appropriate R10bn to the struggling national carrier.

SAA continues to make significant losses and the airline's finances have deteriorated to such an extent that it cannot afford to pay suppliers. In addition, SAA needs to honour debt obligations amounting to R6.785bn by the end of September.

In the Cabinet memo, Gigaba conceded that recapitalising SAA will only temporarily solve the airline’s low cash reserves. SAA has a total of R19.114bn in government guarantees, of which R2.7bn is not utilised. Government guarantees to SAA rose from R1.3bn in 2007/08 to R19.1bn by September 2016, an increase of about 35% per year.   

"SAA has been in trouble for over a decade and is now in very serious trouble due to the ANC government’s utter failure to turn it around," Lees said in a statement.

"The Standard Chartered Bank demanded payment from SAA in June this year and this no doubt caused other banks to demand payment. If there were any leverage, it was blown when Standard Chartered refused to roll over its R2.2bn loan to SAA two months ago."

In Lees' view, the bank’s lack of confidence in SAA and the SA government has nothing to do with the DA’s revelations in Parliament and everything to do with a complete lack of confidence, "based on the actions of the government and the mismanagement of SAA’s finances".

SAA should be put in business rescue and private equity investors found, according to Lees.

Fin24 reported earlier on Friday that Janine Myburgh, president of the Cape Chamber of Commerce and Industry, also made a call for government to get out of the commercial airline space and sell the loss-making SAA.

In the Cabinet memo, Gigaba said the sale of non-core assets, such as government's stake in Telkom, is the only viable option to recapitalise SAA.

Myburgh, however, said it does not make any sense to sell a good asset such as Telkom to "prop up a bankrupt airline with a bleak future". In her view, government should get out of the commercial space.

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