Nene approves additional R6.4bn guarantee for SAA

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

PW Botha wagged his finger and banned us in 1988 but we stood firm. We built a reputation for fearless journalism, then, and now. Through these last 35 years, the Mail & Guardian has always been on the right side of history.

These days, we are on the trail of the merry band of corporates and politicians robbing South Africa of its own potential.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.

Sapaxxxx
Guest Author
Advertisting

Border walls don’t stop viruses, but a blanket amnesty might

Why South Africa should consider amnesty for undocumented migrants in the time of the coronavirus outbreak.

Mail & Guardian needs your help

Our job is to help give you the information we all need to participate in building this country, while holding those in power to account. But now the power to help us keep doing that is in your hands

Press Releases

The online value of executive education in a Covid-19 world

Executive education courses further develop the skills of leaders in the workplace

Sisa Ntshona urges everyone to stay home, and consider travelling later

Sisa Ntshona has urged everyone to limit their movements in line with government’s request

SAB Zenzele’s special AGM postponed until further notice

An arrangement has been announced for shareholders and retailers to receive a 77.5% cash payout

20th Edition of the National Teaching Awards

Teachers are seldom recognised but they are indispensable to the country's education system

Awards affirm the vital work that teachers do

Government is committed to empowering South Africa’s teachers with skills, knowledge and techniques for a changing world

SAB Zenzele special AGM rescheduled to March 25 2020

New voting arrangements are being made to safeguard the health of shareholders

Dimension Data launches Saturday School in PE

The Gauteng Saturday School has produced a number of success stories