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Cape Town – “We’ve seen this movie before and we know how it ends – SAA continues to fail and will need more bailouts.”
This was the view of Alf Lees, Democratic Alliance spokesperson on SAA, following reports of Finance Minister Malusi Gigaba’s proposal that government sell its stake in Telkom to bail out SAA.
Fin24 earlier reported that Gigaba wants to introduce special legislation to allow for a R10bn recapitalisation of South African Airways by tabling a Special Appropriations Bill to appropriate additional money to SAA.
Gigaba proposed that government disposes of its 39.75% shareholding in Telkom, which is currently valued at approximately R14.4bn, saying the sale of non-core assets is the only viable option to support SAA that will not increase the budget deficit.
READ: Secret memo shows SAA to get R10bn bailout from Telkom share sale
Lees said in a statement issued late on Wednesday that the reports are “deeply disturbing”.
“The ANC government has known for more than ten years that SAA is doomed. Yet, the ANC government has actively chosen, over and over again, to throw R23.3bn in bailouts and guarantees since 2008 at the problem, instead of cutting the losses.”
Gigaba, in his explanation for SAA’s bailout, said SAA has to repay an amount of R6.785bn at the end of September 2017 of which R1.761bn is owed to Citibank, which did not want to extend SAA’s loan facility beyond the end of September.
SAA is not in a financial position to repay Citibank, or any of the loans which is due on September 30. If SAA fails to honour these debt obligations an additional R7.8bn in guaranteed debt – which is due between 2019 and 2022 – will need to be paid immediately due to the so-called cross-default clauses, which means a borrower is automatically in default if it defaults on another loan obligation.
READ: Ratings agencies will keep a close eye on SOE guarantees - economist
He further said that SAA doesn't have enough cash reserves to pay its suppliers, although it managed to defer payments of close to R750m. The airline is, however, not generating sufficient cash to pay suppliers timeously.
This, coupled with the unwillingness of lenders to extend the loan agreements – even with government guarantees – requires urgent intervention from government.
Lees said the yields from the proposed sale of Telkom assets could be used for other purposes, such as education, or job creation efforts to keep women and children safe.
READ: Selling R14.4bn Telkom stake for SAA not a done deal - Gigaba spokesperson
“The effect of the numerous government bailouts and the dire financial situation at SAA is not limited to depleting the public purse, but has also been partly responsible for ratings downgrades and negative outlook ratings from international agencies”, he added.
The only option left, with any hope of plugging financial hole, is for the ANC government to put SAA into business rescue to stabilise the airline before taking it to the market to find private equity investors, according to Lees.
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