Government won’t fund SAA again, says Gordhan

Reading Time: 2 minutes

The Minister of Public Enterprises, Pravin Gordhan, has reiterated that the national fiscus will not in the future fund the South African Airways (SAA).

Gordhan and the SAA Business Rescue Practitioners (BRPs) briefed Parliament’s Standing Committee on Public Accounts (Scopa) on the airline’s business rescue process and investigations carried out by the Special Investigating Unit (SIU).

Besides previous bailouts amounting to billions of rand, the airliner has received R7.8 billion to implement the business rescue process. The total cost of the process is R10.5 billion.

Gordhan says government is taking responsibility of restructuring costs and the private equity partner has to come with future capital.

“The fiscus will not make any contributions in the future, let me emphasise that the fiscus will not be required to make any contributions in the future because the parallel process to this that is taking place is the acquisition of a strategic equity partner and with all of those interested parties discussions have taken place with it has been made clear that whilst we take responsibility as government for the restructuring costs, the partner has to come in with future capital,” says the Minister.

The future of SAA in the spotlight once again:

The SAA BRPs have told Scopa that the business rescue process will come to an end in the next weeks.

Business Rescue Practitioner, Siviwe Dongwana, says the process has resulted in the SAA becoming solvent and liquid. It has also resulted in a reduction in liabilities and claims.

Dongwana adds that they were able to offer workers better packages compared to what they would have received if the airliner was liquidated.

“There was a general consensus that SAA had a high number of staff relative to the airline of its size we have now gone through a process where we reduced the airliners employees from 4 700 to approximately a thousand through VSP and Section 189, which was found to be in line with the Labour Relations Act,” he says.

In September, an Intellidex Capital report warned that funding the airline from the fiscus would have serious implications. It said this would force some government departments to make large cuts in their expenditure on important things like infrastructure  and also send a worrying signal to investors, including the IMF and the World Bank.