Finance minister Nhlanhla Nene does not expect SAA to return to profitability in the next five years and until then government will have to continue its assistance to ensure the state-owned carrier can continue operating.
According to his mini-budget, government guarantees amounting to R14.4 billion have been given to SAA, of which R11.4 billion have been used.
SAA, which has been moved earlier from the oversight by Department of Public Enterprises to National Treasury, has executed its 90-day action plan, which included closing unprofitable routes, reducing the cost of its fleet, and reviewing onerous agreements and procurement contracts.
The mini-budget acknowledges that a successful turnaround “will require continued diligent implementation of a long-term strategy to boost revenues, contain costs, strengthen governance, improve accountability and manage performance”.
Even if well executed, SAA is only expected to return to profitability in five years’ time and until then government support will have to continue supporting it to ensure its ability to continue operating.
Nene said during a media briefing legislation is lacking to authorise government taking over distressed state-owned companies. Work is being done to close this gap.
He said SAA is also plagued by information leaks with little clarity about the accuracy of such information.
Eskom’s finances have been stabilised thanks to the R23 billion equity injection funded by the sale of government’s stake in Vodacom, the conversion of its R60 billion subordinate loan to equity and government intervention on municipal arrears.
While the mini-budget is quiet on the state of the embattled Post Office, Nene said during a media briefing that the Post Office has a new board and progress is being made with the implementation of a strategic turnaround plan. Announcements in this regard will be made in due course, he said.
Treasury DG Lungisa Fuzile said the immediate focus is to stabilise the Post Office’s cash flow, to ensure its ability to pay its creditors.
According to the mini-budget the new financial management framework for SOCs announced a year ago is currently being piloted at a number of entities. This entails the separate costing of developmental mandates and commercial activities, with the cost implication of each set out more clearly in shareholder compacts.
While this is underway, government is working to stabilise those entities that are in distress in order to prevent risks from materializing that may result in calls on government guarantees and requests for more money. “Government remains committed to deficit-neutral capital financing of state-owned companies in the years ahead.”
In June government guarentees to SOCs amounted to R470 billion with Eskom, Sanral and SAA having the largest exposure. A total of R245 billion has been utilised.
Sanral has maintained its investment-grade rating and remains well-funded over the medium term. Total guarentees to the roads agency amount to R39 billion with R32 billion being committed.
R301 million has been allocted to Sanral to compensate for the reduction in toll fees as part of the new Gauteng-toll dispensation announced by deputy president Cyril Ramaphosa earlier this year. The amount is allocated for the first year of the new dispensation.
The mini-budget states that this dispensation “has created greater certainty about Sanral’s finances and restored confidence in its investment programme. Sanral’s most recent bond issuance was oversubscribed”.
Half of the R301million will be recovered from the Gauteng provincial government.