Finance Minister Nhlanhla Nene is giving cash-strapped SAA an additional R6.488-billion guarantee.
Finance Minister Nhlanhla Nene has approved an additional R6.488-billion guarantee for the country’s cash-strapped national airline South African Airways, the finance ministry said on Thursday.
“The additional guarantee will enable SAA to finalise its annual financial statements for 2013/14, making it possible for the airline to hold its annual general meeting (AGM) on Friday next week, 30 January 2015,” it said in a statement.
This took the total guarantees granted to the airline to R14.4-billion. A guarantee was not a transfer of money, but allowed an entity to borrow against it. The ministry said it was an undertaking for government to take on the liability of the entity’s debt obligation in the event of a default.
There were six conditions attached:
- Within a month SAA had to provide treasury with a comprehensive implementation plan for its “90-day Action Plan” interventions. This included timelines for targeted savings and which managers were responsible for delivering those savings;
- Government and SAA would review and stress test the financial model and refine long-term turnaround strategy;
- SAA must develop proposals within three months on the network structure, fleet strategy and structure of the airline, for government’s consideration;
- Within three months the airline must identify areas where it can cut operating costs, and how those cuts would be achieved;
- SAA must strengthen governance, internal controls and working capital management, and develop implementation plans. Progress reports would have to be submitted monthly; and
- The airline would also submit weekly reports to the treasury.
SAA was one of three state-owned companies transferred to the treasury from the department of public enterprises on December 12 after Minister in the Presidency Jeff Radebe said Cabinet was concerned about their performance.
While treasury would take over control of the airline – and its subsidiary Mango – Radebe said Deputy President Cyril Ramaphosa would oversee the turnaround plans. “The deputy president will be hovering over them like a hawk to ensure that the turnaround strategy is executed.”
While this is the first time that a state-owned entity has been handed over, treasury has been increasingly used to steer errant government departments back on course. It has intervened in the Eastern Cape and Limpopo, after department’s in both provinces went technically bankrupt.
Colin Cruywagen, public enterprises spokesperson, said the ministers of finance and public works had been working together for some time over the poorer performing state-owned enterprises. “The transfer will be done in an orderly fashion.” He also denied that the move of SAA from his department was indicative of any failure on its behalf to solve the airline’s crisis.
Last month, Nene held an introductory meeting with the SAA board of directors, after the treasury took control. – Sapa, Staff reporter