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SAA pays salaries from tax refund

The airline was barely able to pay salaries in May.

*Update includes response from SAA in the fourth paragraph below. 

South African Airways is in dire financial straits. 

Moneyweb has established that the airline paid managers’ salaries on May 25 from a VAT refund, while the rest of staff were paid on May 27 from a loan the airline secured. There is considerable doubt as to whether the airline will be able to pay staff and suppliers in June. 

This follows a report in the Sunday Times that Standard Chartered Bank has rejected a request by SAA to extend the loan facility, which matures at the end of June.

Moneyweb submitted questions to SAA early Monday morning regarding the payment of salaries, and received a statement later Monday evening, part of which stated the following: “SAA has been in contact with its lenders to renegotiate the management of its loans, a normal occurrence when loans become due and payable. The airline has government guarantees totalling R19.1 billion. By 30 June, R9 billion will be due and payable and only one lender has expressed a desire to have its loan paid back. 

“We remain optimistic that the company will meet its loan obligations as these become due through negotiations with lenders and other initiatives,” says Musa Zwane, SAA Acting CEO.

The Public Investment Corporation (PIC) did not respond to questions.

Moneyweb also inquired with a large supplier of SAA to see if there had been any non-payment or delays for goods and services rendered. At this point, the airline is within its credit terms (30 days). 

There has been speculation that the PIC is putting together a recapitalisation plan, despite the Government Employee Pension Fund (the PIC’s biggest source of funds) issuing a statement denying this last month (see below).

The GEPF reiterated this position on Monday:  “The GEPF’s position with regards to funding SAA still stands as per the media statement that was issued by the fund, however, if there are any changes the GEPF will engage with the PIC on this matter as we always do.” 

To this end, Moneyweb asked the Minister of Finance, Malusi Gigaba, directly last Thursday whether the PIC was drafting a recapitalisation plan for the airline. He did not refute the statement directly. Instead, he said: “We are looking at ways to recapitalise it. This will be linked to [restoring] good governance. We will ensure they implement the turnaround strategy. The new CEO will be responsible for that. It has to regain the confidence of its patrons. We think we can get it done. SA is a regional hub. It has patrons who can afford to fly. We are going to be tough with SAA. They will need to demonstrate they are prepared to regain the confidence of the public.”

GEPF is not funding South African Airways – May 25 statement 

Government Employees Pension Fund (GEPF) would like to reiterate and to assure its members, pensioners and beneficiaries that their pension savings are safe.

Last week National Treasury told the National Assembly that it is considering various options to recapitalise South African Airways (SAA) which includes the Public Investment Corporation (PIC) who is our fund manager as a possible equity partner, however Treasury speculation is perceived as confirmation that the GEPF’s assets will be used through the PIC to Fund SAA.

The GEPF would like to assure its members, pensioners and beneficiaries that the Fund has not received or been approached with such a proposal and no discussions have been held with GEPF on this matter, therefore we urge all our members and pensioners not to panic or read too much into this speculation. The GEPF through the PIC receives many requests all the time and rigorously considers the merits of all investment opportunities and invests prudently in the best interests of its members, pensioner and beneficiaries.

The GEPF adheres to strict regulations governing its financial liability to members, beneficiaries and pensioners, as well as its financial soundness. Moreover, the GEPF has confidence in the PIC’s ability to prudently invest funds on its behalf in terms of the agreed investment mandate. The GEPF constantly monitors and evaluates the PIC’s performance in accordance with its investment policy and mandates.

GEPF members, pensioners and beneficiaries are reminded that the primary role of the GEPF is to protect the wealth of its members and pensioners by safeguarding their retirement benefits through proper administration and prudent investment. 

According to the Democratic Alliance, SAA has listed R8.88 billion repayable in the current financial year, but some of these dates have already come and gone. “All of SAA’s loans are backed by government guarantees that in total now amount to R19.1 billion,” wrote the DA’s Alf Lees on the party’s website at the weekend. 

The problem with SAA’s position is that the uncertainty could in effect create a “bank run”. As the true nature of the airline’s fiscal position is made public, lenders start demanding the immediate repayment of loans. This effectively means that the state or a related party involved in the recapitalisation (like the PIC) steps in to take over the debts. The entity then becomes completely dependent on the fiscus for support, which means National Treasury may have to write a cheque in the next few days to keep suppliers from taking the airline to court, and potentially having it placed in business rescue.

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COMMENTS   15

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like Stuttafords – SAA doesn’t deserve to survive. and remember YOU the taxpayer are paying for all of this – mainly thru your pension held by the PIC (refer my comment on zumaeconmonics and your retirement)

Yup, with you on that one! (..sadly) And, do we still need a national carrier for the sake of national “pride”? Or as a so-called “strategic” asset?

It also baffles the mind how SAA “manages” (pardon the pun) to make multi-billion losses on an annual basis, while competitor airlines operating in the same (local flights) environment like Kulula/Comair makes profit, and still be price-competitive. While While being profitable, Kulula operates no international flights (where SAA does) which are said to be the more profitable routes.

Software developers can now come up with a new online game: GRAND THEFT Auto…err, Aeroplane” 😉

Yes they are in the poops – and the Managers are paid first. That in itself shows the mentality of these at the top.

They will be bailed out again…same old story

yeah – but by whom – YOU the taxpayers!

Robert, we are all very well aware that our hard earned taxes are used to bail out useless, non-performing government institutions. What baffles me is that you are so quick to point this out each time, but then insist on more of the same through hardcore BEE and enforced, uncompensated land redistribution.. Or do you not see that as ironic?

SAA has employed hundreds of “war veterans” working as ground staff. Massively overstaffed. Thats why the government keeps bailing them out.

Yup. The number of staff employed per aircraft operated is a very measure of how overstaffed they are.

Check this out:

https://www.sapromo.com/horrific-stats-about-saa/1959

My guess is that head office at SAA is full of employees doing very
little, sitting around all day looking for an opportunity to get
something for nothing.

I’m playing devils advocate here…

1. The apartheid government did the same to uplift whites. Your Iscor, Denels, SAA, Railways etc. The same goes for other governments around the world.

2. If the unemployment is higher; you will still be subsidising via UIF and other social schemes . A a man a decent job; which is much better.

3. High Unemployment will result in high crime, subsistence abuse and violence. We see this already. Which eventually will lead to revolt and tyranny (signs are there already where JZ leading the pack)

Food for thought.

Wonder if they are skimping on maintenance to save money?

So now ANC is thinking of raiding the PIC to bail out SAA. Poor pensioners. Their retirement money will be totally wasted. First is SAA, then Prasa, then Eskom

Oh my hat, there is no end to the hilarity that is the SAA sh**show. If only we could drag it out behind the barn and put a bullet in its head to end its suffering, and that of the taxpayer.

That is why I will never fly SAA … I will rather spend the night in a hotel to catch the Kulula early bird than contribute to the disaster that is SAA. We need to stop this ludicrous “rewarding of the incompetent” mentality.

Pity as I have friends who are good, dedicated SAA pilots.

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