Government has yet to find the remaining R2 billion needed for the South African Airways (SAA) business rescue plan but has reaffirmed its commitment to seeing the business process to its successful conclusion.
“Following a meeting with the practitioners at the weekend, the Department of Public Enterprises is engaging with the National Treasury to raise funds for the airline in line with the [post-commencement funding] undertaking,” the Public Enterprises Ministry said in a statement on Sunday.
When SAA took the route of voluntary business rescue in December, Public Enterprises Minister Pravin Gordhan said R4 billion would be needed for the operation, and that half of the amount would be raised from lenders while the other half would be raised in a “fiscally neutral manner”.
Speaking at a breakfast briefing ahead of the annual World Economic Forum on Thursday Finance Minister Tito Mboweni said the government was still working on securing additional funding for SAA.
While it emerged last week that the airline had placed nine of its aircraft, 15 engines and other parts for up sale on January 10, it denied claims that this was in order to raise the R2 billion. Instead, the airline said the sale was to accommodate four new aircraft that have been added to its fleet.
Nothing but determination
Business Day reported business rescue practitioner Les Matuson as saying that government had until January 19 (Sunday) to release the money or SAA would have to suspend certain flights.
In response to Moneyweb’s questions, Matuson’s spokesperson Louise Brugman was able to confirm that flights would remain operational. However, she could not provide information on whether the government has been able to find the remaining R2 billion needed for SAA’s business rescue plans.
The ministry said it was “determined” to contribute to the process to reduce job losses, while creating “a sustainable, competitive and efficient airline with a strategic equity partner”.
“The business rescue process is unprecedented at this level and fashion, and in the public sector,” it said.
“It is a decisive move that demonstrates that government will undertake the necessary bold steps in order to reposition its assets in such a way that they do not continue to depend on the fiscus and thereby burden taxpayers.”
Martin Kingston, who resigned from the board of SAA on Friday, says business rescue is the best option for the airline.
Kingston, who is executive chair of the board of Rothschild & Co in South Africa, told Moneyweb that SAA needs “drastic changes” to its operations – and not just in terms of its routes, operational structure and management. “It also requires adequate capital, which has been a problem for some time,” he said.
Kingston also explained his move to step down as director.
“There is no need for me to be on the board given the appointment of the business rescue practitioners,” he said.
“They assume the responsibilities of the board and the underlying strategy and business operations.
“We relinquish that responsibility … there’s nothing I can do that I can’t do on the sidelines,” he added, saying that he will continue to assist and provide input as required.