Gordhan’s budget commitment for SAA questioned

Civil servant pensions targeted for short-term loans.
Gordhan’s department seems to have given itself until late October to find the funding and is hoping lending institutions will provide the ‘money in the bank’ that SAA needs now. Image: Supplied

Government will in the coming week sort out where to find the more than R10 billion needed for the restructuring of South African Airways (SAA) and start of the ‘new’ SAA, according to Public Enterprises Minister Pravin Gordhan.

Gordhan told Bloomberg that government’s commitment is clear, and that meetings in the coming week will resolve “the money issue”.

This comes after his department said in a statement on Friday that money will be reprioritised in Finance Minister Tito Mboweni’s adjustment budget next month and the hole will in the meantime be plugged with loans.

Whether Mboweni has agreed to any provisions in the adjustment budget is however unclear.

Treasury remains silent

National Treasury did not respond to questions in this regard and several commentators are convinced the public commitment was made without approval from Treasury.

Mboweni has in the past expressed his view that SAA should be closed.

A lack of support from Mboweni could result in a repeat of the events in February, when the SAA business rescue practitioners (BRPs) had to go back to the drawing board after Mboweni failed to allocate the expected funds in his main budget.

As a result, they were considering the winding down of SAA, but Gordhan started a parallel process with unions that was later incorporated in the business rescue plan and provides for generous retrenchment packages and the retention of only 1 000 of the current 4 600 staff members.

Rescue plan adopted in July

The plan was adopted by creditors in July and required more than R10 billion in funding for, among other things, the severance packages, payment of creditors and the start-up capital for the ‘new’ SAA.

Read: SAA rescue plan comes into operation

Government committed to “mobilise” the funding, but this has not yet materialised, despite the best efforts of the BRPs.

At a creditors’ meeting on Friday, BRPs Siviwe Dongwana and Les Matuson said the airline has no money left and they are considering winding it down or applying for liquidation.

Dongwana told creditors they had received a letter from the Department of Public Enterprises right before the meeting repeating its commitment to provide the necessary funding. He said the BRPs would, in the coming week, engage with government on the timing of the promised funds.

The BRPs refused to make the letter public.

Moneyweb has however learnt that it was co-signed by Gordhan and Mboweni, but does not go as far as making commitments regarding the Medium-Term Budget Policy Statement (MTBPS) in late October.

Creditors to be advised ‘this week’

According to BRP spokesperson Louise Brugman SAA now needs money in the bank, and Dongwana and Matuson are currently considering the pros and cons of a wind-down or liquidation so they will be in a position to advise creditors this week should the funds not materialise.

However, the department in its statement on Friday stated emphatically that SAA will not be liquidated.

According to Bloomberg it is trying to get short-term loans from the Development Bank of Southern African (DBSA) and the Public Investment Corporation (PIC), which manages the investments of the Government Employees Pension Fund (GEPF).

The PIC has been under considerable scrutiny in the recent past for making dubious investment decisions and already has large exposure to struggling state-owned enterprises, further investments in which could result in a serious backlash.


The department has so far had no success in securing further loans for SAA’s rescue plan, and any bridging finance it succeeds in obtaining now could be extremely expensive.

Intellidex head of capital market research Peter Attard Montalto says the situation undermines investor confidence in government.

“Games continue but it is likely to have the increasing fallout of damaging sovereign credibility in the minds of investors, with one minister sending highly tactical press releases making commitments that National Treasury has not agreed to on the one hand and National Treasury silent on the other.

“Unfortunately, this [could] continue to the end of October as the BRPs will not call out such games,” he adds.

“Ultimately however the MTBPS process is hard enough as it is without trying to shoehorn SAA in as well, adding to the R250 billion of cuts that have to be found elsewhere.”

Interested parties, and politics

Gordhan seems to be pinning his further hopes of money flowing into SAA on the 20 parties that have allegedly submitted unsolicited bids for participation in SAA. According to his department, these include “private sector funders, private equity investors and partners for a future restructured SAA”, but no further detail has been provided.

Bloomberg reported earlier this month that Ethiopian airlines is in talks with government about support for SAA, including the possibility of taking a stake in the restructured airline.


In the meantime, the National Union of Metalworkers (Numsa) and the South African Cabin Crew Association (Sacca) are threatening to oppose efforts to liquidate SAA in court.

Political commentator Theo Venter says Gordhan’s apparent obsession with saving SAA stems from his communist belief in central control by the state. Mboweni on the other side is more free-market orientated.

Venter says Ramaphosa came to power in the ANC with the support of the Communist Party and needs it again in the upcoming municipal elections and for his own campaign for a second term at the helm of the ANC.

He believes Mboweni will eventually have to budge, but it will not be without compromise from Gordhan.


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No need for the state to commit to putting in any funding at all.

I agree, the BRP said that SAA would be rescued without government. Why is Gordhan committing funding to SAA? Is it an election year already?

This is definitely a first worldwide – placing a business recue in business rescue…

These guys spent 10 Years trying to make SAA profitable and only succeeded in making it worse. What divine intervention do they have to think they can now make it work??

I hate seeing good hard earned tax payers money getting thrown after bad.

“I’m a socialist drinker!” The bartender chuckled and asked me, “Don’t you mean social drinker?”
“No, I only drink when someone else is paying.”

And that, boys, is why I’ve liquidated all assets and moving offshore. If they do not have the balls to sort something relatively minor like SAA, imagine what they will be doing with big issues like public debt, excessive salary budgets and failing SOEs. We on a hiding next to nothing sadly

If the pension funds want to buy something that has an engine and has a business model that flies, they should consider John Deere and Caterpillar. Deer offered a 29% CAGR in rand terms over the last 2 decades and pays a 2% dividend in dollars.

Ony basket case socialists will buy SAA that is crashing when they can buy Deer that is flying. They throw the viable and successful Comair under the bus and they support the disastrous SAA SOE. Basket case socialists want to protect jobs by throwing good money after bad, and by throwing entrepreneurs under the bus, while only entrepreneurs with money can create jobs. How stupid can you get?

This quest to “save jobs” to buy votes from unions, motivates basket case socialists to implement losing strategies that always deliver more unemployment and bankrupts the state.

Agreed, there are far better investments and worthy causes than SAA.

The voters are indeed gullible, ignorant and immature. They are jobless slaves to a socialist master who has given them no purpose.

Tax payers are revolting but time precious time is running out.

ANC MPs can’t travel 1st class on John Deere Tractors !

Basket-case socialists don’t want to buy SAA, not with their own money anyway. They want to use someone else’s money for their own political purposes.

With the (ANC) collective every commitment becomes a conundrum.

When will this nightmare circus end? Billions have been put into something that doesn’t make money?! Insane!

At what stage are the BRP’s obliged to do the right thing and bring this sorry saga to an end? Surely – it’s their fiduciary obligation to complete their task in reasonable time? I’m no expert, but they don’t seem to be following the rulebook for BRP’s – I trust that ASISA or some other industry watchdog will start looking at their accreditation if they keep kicking the can to please Pravin – no doubt hoping for more business if they accommodate his wishes…

Minister PG; is not working in isolation. He has a mandate from the ANC; which he has to fulfil. Tito and PG; HAVE TO carry out what they are mandated to do. I know this, that you cannot split PG and the ANC; others have tried. The apartheid government and police tried. The EFF is trying.

From the start of this debacle is has been obvious to everyone with slightly more than the most basic understanding of how a business is run that this business has failed. It will never fly ..

That the ANC is being pressured by the irrational, aggressive trade union is indicative of their inability to govern and inability to know what to do with this trade union which seems to think that it is owed a living by the SA taxpayer.

The only solution they have is to drain the treasury to hold on to their voters.

I though Pravin Gordhan was intelligent.
He proved me wrong, again, and again … and maybe again.

No such thing as an intelligent communist.
Starting an airline in 2020 is possibly the worst business decision anyone has ever made in the history of the world.
But if there is money to loot and distribute to the comrades, who cares, right?

Sigh, it is an old storey in SA. My view is that no one that has any control at SAA actually wants or cares about flying passengers and freight around at a profit. For them, the sole purpose of SAA is to benefit themselves; either financially, their families, their egos or their ideologies, maybe some of each. As, very appropriately, Jackie Selebi would say, “Finish en klaar”.

The communists are addicted to their pathetic little bankrupt SOEs. The SOEs feed their delusions of grandeur. It helps them to feel important and in control of something. They see their control over the SOE as the way for them to compete with the entrepreneur, the CEO and the investor. They parade around like little demigods in front of the staff and the press. They profess to be the saviours of jobs, the fighters for wages, the protectors of social justice and the solution to all levels.

This addiction is very destructive because they use the law to force taxpayers to fund their habit. Socialists never rehabilitate, they invariably end up in the gutter.

Every BRP, lawyer, accountant (firms or individuals), CEO & manager should refuse to touch this. They should all walk away from it no matter what fees or salary is offered. It will then just dissipate all by itself because Government will not have the people / management skills to operate anything or even run the payroll. The carcass is only kept “alive” by self interested parties expecting “someone” (else) to come up with money for it from month to month.

You all keep forgetting the most important point, the cronies are the creditors and have the tenders at SAA, so the cronies will go to any length to save SAA and get their money.

Proof that the commie Jamnadas has no gonads whatsoever. When he was FinMin he wasn’t interested in putting money into SAA, now that he is on the other side of the fence he thinks it is a free for all.

Not without compromise from Gordhan?
At what cost to his credibility at home and internationally? Next time his at a G7 or 20 in Switzerland he’ll be the clown of the show…
Mind you, he vowed with the Covid emergency budget “no EMERGENCY funding for SAA; suppose in his mind and that of his thieving party, the mini budget in OCt, isn’t “emergency.” No doubt tax payers see it differently….

SAA = Einstein’s definition of madness in action.

End of comments.



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