National Treasury is considering a number of avenues to finance the loss-making SAA, which may include the Public Investment Corporation (PIC) as a public equity partner.
During a Parliamentary briefing on SAA’s financial performance, the Democratic Alliance’s Alf Lees and David Maynier pressed Acting Treasury Director General Dondo Mogajane to say whether SAA will be partly financed with funds from the Government Employee Pension Fund.
I want to know if SAA’s equity partner could be a public one, Lees said.
National Treasury made it clear there will be a recapitalisation of SAA. And we’re left with the distinct impression that the GEPF could be the public equity partner who would invest pensioner’s money into the loss-making airline. Has this been proposed?
The DA’s questions followed after Finance Minister Malusi Gigaba recently acknowledged in a Parliamentary question-and-answer session that SAA’s consideration of a minority equity partner may not necessarily be a private one, but that it could also be a public entity.
Mogajane told members of Parliament on Wednesday that National Treasury is taking a long-term view with regard to the recapitalisation of the airline, which may also include a cash injection.
He did not reject the possibility of the PIC as an equity partner outright, but said there are “options available.
It could make sense to get other lenders to take over the current debt, including engagements to repatriate funds in foreign currency. It may not even be necessary to recapitalise the airline to such an extent, Mogajane said.
Deputy Finance Minister Sfiso Buthelezi earlier in the briefing said SAA’s cash flow was affected by R1.05bn that cannot be repatriated from Angola, Zimbabwe, Nigeria and Senegal.
National Treasury will call on the highest office – even President Jacob Zuma if need be – to get these funds back, he said.
SAA is currently using Seabury consulting group to re-evaluate SAA’s long-term turnaround strategy, including its recapitalisation needs.
During a second round of questions, the DA’s Maynier said it would be outrageous for a public investment company, such as the PIC, to invest in SAA.
This is pensioners’ money that will be invested in an enterprise which has no chance of returning to profitability.
Derek Hanekom, former tourism minister who was recently appointed as an ANC member of the standing committee on finance, commented that it was unfair to say that SAA would never return to profitability.
He added that a national carrier has a strategic function beyond making profits. The main intention should not be to make profits, as it would then limit the purpose of having a national carrier.
There is a reason for having a national carrier – to put it to strategic use even if there are loss-making routes. A loss-making route may have a purpose because of tourism. We should look at it in a more nuanced way,Hanekom said.
The national carrier’s financial performance for the year to end March 2017 reflects a R4.8bn loss.
Recently appointed CFO Phumeza Nhantsi told MPs that the cumulative amount of guarantees given to the airline thus far is R19.1bn.
The airline’s cost-cutting efforts however, have saved R700m in the 2016/17 financial year, although the results haven’t been audited yet.
SAA’s cash burn rate, is still high though at R250m per month. To this end, a cash conservation office has been set up to monitor spending, Nhantsi said.