A report by released by Intellidex Capital has warned that funding South African Airways (SAA) from the fiscus would have serious implications.
It says it would make the Medium Term spending process more complicated by forcing some government departments to make large cuts in their expenditure on important things like infrastructure.
The report also says that funding the struggling airline would send a worrying signal to investors, including the IMF and the World Bank.
SAA needs R10.4 billion to re-start and will need more funding for recapitalisation by the beginning of next year.
Government had until last week to announce where the funding would come from but missed the deadline.
However, it says it is still firmly committed to funding the state carrier.
Intellidex analyst Peter Attard Montalto says, “Government could well fund the money for SAA and the cabinet meeting is expected to authorise the R10.4 billion. However, we think there are better things to spend the money on like infrastructure which will be cut.”
“Jobs plan that the President (Cyril Ramaphosa) is pushing might also be cut and the education and healthcare. So ultimately it is not going to be about finding the money per se but the negative impact of having to find that money to fund SAA,” explains Attard Montalto.
In the video below, unions to picketed outside SAA headquarters on last week Friday:
Last week, Business Rescue Practitioners have confirmed receiving a letter from the Department of Public Enterprises and Treasury making a commitment to provide the R10.4-billion funding needed to restructure the airline.
Administrators at the struggling airline called a creditors’ meeting after the government missed a deadline to make funding available for the airline’s restructuring plan.
The administrators took control of state-owned SAA in December last year after almost a decade of financial losses.
They then published a rescue plan in June following repeated delays and wrangling over SAA’s future.
Of the more than R10-billion needed, around R2.8-billion is required for initial working capital.
In the video below, Numsa says it will take legal action to prevent the liquidation of SAA: