Thursday, 10 May 2018

SOUTH AFRICA: South African Airways Needs $399 Million Cash Injection To Stay In The Sky

South Africa’s state carrier SAA requires a $399 million cash injection in the current financial year to help it meet its financial obligations, a senior treasury official said on Tuesday.

National Treasury director-general Dondo Mogajane told parliament the cash injection could however not come from government, which has so far pumped 20 billion rand into the firm.

Mogajane said treasury was willing to consider selling a stake in the airliner to a private equity partner.

Investigations into the audit of South African Airways is to be finalised soon.

The Independent Regulatory Board for Auditors (IRBA) has told Parliament’s standing committee that the probe is far advanced.

It follows a complaint by Democratic Alliance MP Alf Lees against auditors PriceWaterhouseCoopers and Nkonki Inc.

He’s questioned the national carrier’s going-concern status, when it’s struggling to stay in the sky.

Treasury says the national carrier needs another R5 billion in this financial year to keep flying. This is on top of last year's R10 billion bailout.

IRBA chief executive Bernard Agulhas says that the regulator completed its probe of SAA's 2015/2016 financial statements but decided to conduct further checks.

We are concerned that there might be broader issues that we need to cover as more information comes to our attention.

We cannot continue to change the terms of reference of our investigation, but we cannot ignore anything that comes to our attention.

Agulhas says he expects the probe to be finalised at the next meeting of the board's investigations committee.

South African Airways requires a R5 billion cash injection in the current financial year to help it meet its financial obligations.

This is according to National Treasury director-general Dondo Mogajane, who has told parliament the cash injection could not come from government as it has already pumped R20 billion rand into the state-owned enterprise, reports Reuters.

Instead, other avenues are being considered to help cover the shortfall, with Mogajane saying that the National Treasury was willing to consider selling a stake in the airliner to a private equity partner.

The consideration follows confirmation by deputy minister of finance, Mondli Gungubele, that the airline will require an additional R12 billion in bailouts over the next three years.

Speaking to parliament in April, Gungubele said that SAA would need another government bailout in the 2018/19 financial year of R5 billion – with another R5 billion needed in 2019/2020, and another R2 billion needed in 2020/21.

This would allow the airline to continue operations, and also to help service its debt which matures in March 2019.

CEO Vuyani Jarana is at the early stage of a turnaround plan designed to return the carrier to break-even by 2020 and ease dependency on the government, which last year approved a bailout to swerve a default on debt owed to Citigroup Inc.

The airline has shaken up the board and cut routes to reduce costs but is yet to emerge from any financial distress.

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