Treasury is still seeking SAA funds

Who’d be Finance Minister Tito Mboweni? There he is in Davos, selling the country to the global gentry (his boss, President Cyril Ramaphosa stayed at home this year), while trying to scrape R2-billion together to keep SAA in the air.

Although Mboweni has been prepared to stump up the R2-billion to keep the beleaguered airline operating while in business rescue, he has said that this money will be fiscally neutral, meaning there will be no additional borrowing.

But this is not proving to be an easy matter, with Mboweni saying before heading to Davos that the treasury was still looking for the money.

It is unclear to what extent travellers are still booking flights with SAA, but the airline announced this week that it had grounded some international and domestic flights due to low demand. It added that the cancellations represent a responsible strategy to conserve cash and optimise the airline’s position ahead of any further capital investment.

The national carrier went into business rescue in December after struggling to pay its bills, with the government no longer being prepared to fund its losses.

The government decided it had stumped up enough over the years and agreed to the business rescue process. Lenders provided R2-billion as post-commencement finance (PCF) to enable SAA to continue to operate and the government, through the national treasury, committed an equal amount, the department of public enterprises said in a statement on January 19.

Louise Brugman, a spokesperson for SAA business rescue practitioner Les Matuson, told the Mail & Guardian that it is still waiting for the funds to flow. “We are waiting to hear what mechanism is available to access these funds,” said Brugman.

Last week it was announced that SAA was selling nine wide-body aircraft; 15 spare engines and four auxiliary power units in a tender. News reports speculated that R37-billion could be raised from selling some of the parts. SAA said the planned sale was to accommodate the new Airbus it recently added to its fleet, and was not part of the business rescue process.

This week Ramaphosa signed an appropriation bill that frees R5.5-billion to the ailing national airline. But this money is not intended for its business rescue.

Emerging markets economist Peter Attard Montalto from Intellidex explained that the signed appropriation bill frees up money that was budgeted in the 2019-2020 financial year. “The bill includes money already committed to SAA. The R2-billion requirement is new money on top of previously committed money,” he said, adding that those bills were written before the business rescue process began.

Aviation lawyer Chris Christo-doulou said it is sound practice for the SAA board to have considered the financing the company will need during the business rescue process. He said that, “PCF sources should be on the agenda when the board makes a decision to enter into business rescue”.

But Khaya Magaxa, the secretary of Parliament’s public enterprises committee, said on Wednesday that he is not aware of steps taken by the treasury to source the money via parliamentary appropriation. 

“There was a commitment from treasury to SAA, and that commitment was made not on the basis that there was money available at that stage. Treasury is going to raise the money somewhere; they are not going to use the money from the fiscus because they know there is no money,” he said. 

Money from the fiscus comes from the national revenue fund and any government institution that needs to access this money must table a special appropriation bill for Parliament to process, or invoke the Public Finance Management Act, which allows the minister to appropriate money without going through Parliament first.

South Africa’s national debt stands at R3-trillion. The treasury warns that it could grow to R4.5-trillion by 2022-23.

The department of public enterprises did not respond to questions from the Mail & Guardian about where exactly the money will be sourced from and how long the process will take.

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Tshegofatso Mathe
Tshegofatso Mathe
Tshegofatso Mathe is a financial trainee journalist at the Mail & Guardian.

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