Newly debt-free SAA is in need of a loan facility and a private equity partner, Transport Minister Barbara Creecy told parliament’s watchdog standing committee on public accounts (Scopa) on Tuesday.
Creecy said there were no private equity offers “on the table” but, as a shareholder, she was unequivocal on the need to find one, be it another airline or a development institution.
“We are not confused,” Creecy told MPs.
“If we don’t have an equity partner, we will lose market share. That equity partner could be a development finance institution, if there were interest and appetite, and it could also be another airline, if there were interest and appetite.
“We don’t have any interests on the table at the moment that we are negotiating. But we are open to the equity partner.”
An initial agreement to sell a majority shareholding to the Takatso Consortium collapsed in March amid a dispute over the value of the carrier, leaving it fully state-owned for the moment.
The now defunct department of public enterprises signalled soon after the deal fell through that it would look for a new investor.
SAA interim board chairman Derek Hanekom said in the meanwhile discussions were underway with banks to secure a loan facility to serve as a bulwark in the event of any financial difficulty.
“We are engaging with banks, not to get a loan at this point, but a loan facility as a kind of a buffer because, while it is debt-free … the cash reserves are low and it makes us quite vulnerable, should there be any shock.
“We don’t have anything to draw on, so it is really to be there as a buffer.”
The minister and board chair were briefing the committee in the absence of audited financial statements for the past two years.
Creecy said the 2022-23 results were “effectively complete” while the audit of the financial statements for last year was underway and expected to be finalised by February.
Scopa chair Songezo Zibi asked whether it would be correct to assume that SAA could only secure a loan facility once it had produced its full financial statements, as this was a standard requirement.
Hanekom said discussions with banks were underway and the response was positive because the airline had been stabilised.
“The banks are looking at our plans, at our business plans, and they are looking at the unencumbered property that we have. There is in the region of R5 billion of unencumbered property and that all stands us in good stead for the possibility of getting this loan facility.”
SAA has 16 aircraft flying three domestic, two international and 10 regional routes. It is aiming to grow its fleet to 21.
Asked by Zibi what the future holds for Mango, the low-cost carrier that was placed in business rescue in 2021, Hanekom said it would be sold.
“The business rescue practitioner can take it out of business rescue by selling it and that is what he has indicated he intends doing,” he said.
“The only alternative would be if the minister finds a significant amount of money, if she wants to, and I would not advise her to do so at the moment because there is nothing there.
“There is hardly anything there to rescue.”
It was Creecy’s first briefing to the committee since President Cyril Ramaphosa transferred responsibility for SAA and Transnet to the transport department in August.
She reiterated that Transnet had reached only 28% of its targets in the past financial year and was operating well below industry standards, with ports averaging 20 crane moves an hour as opposed to 25 to 30.
“This results in long waiting times for vessels,” she said, before stressing that the success of the logistics company was “perhaps the greatest factor in ensuring our economy stabilises”.
The company is also well below its target of shifting 200 million to 220 million tonnes of freight a year, at which point, it is estimated, it will begin to make a meaningful contribution to the economy.
Its current target is 170 million tonnes a year and Creecy said it is aiming to achieve 190 million tonnes by the end of 2025-26.
Her assessment, arrived at after visits to ports, corridors and other facilities, was that the company had been unable to meet its targets, in part because of poor coordination.
“My analysis of that visiting process was that the left hand and the right hand were not adequately speaking to each other.”
Hence she decided to establish a “war room”, which meets daily and was functioning well in her view.
“If there is a problem in a particular port, if there is a problem on a particular line, and if a particular customer has a particular problem, those matters are taken to the war room and solutions are looked for,” the minister said.
“I think that this war room is assisting. It does not take the place of the requirement for capital injection but it does improve current performance.
“It is not going to take it to the levels where we need it to be, which is 250 million tonnes per year, and we are only going to be able to do that in partnership with a private injection of capital — while the network remains state owned.”
Transnet has debt of R137 billion, which carries annual interest repayment obligations of R14 billion. Its total liabilities exceeds its assets by R61 billion, which caused the auditor general to warn that it might not be able to pay its short-term debts as they become due.
It secured a R18.85 billion loan from the Development Bank of Southern Africa in July and in September another of R5 billion from the New Development Bank, the multilateral development bank established by the Brics nations, to support the modernisation of the freight logistics sector
Creecy said the company has a capital requirement of between R100 billion and R120 billion.
“Again, we are not confused — we have spoken about third-party participation,” Creecy said.
“We are hoping that we might have the network statement out, which is the menu and the price, by the end of the year and we are in the process of setting up the PSP [professional service providers] unit in the development bank.”
She added: “We are doing that because one of the things we learnt from private sector participation in energy generation is that if you don’t have a proper facility that enables financial close, you might have bids, but you may not reach financial close.”
