South African Airways (SAA) has been given another month to submit its outstanding financial statements and annual report for the year ended March 31 2015 to Parliament.
Chairman of the parliamentary portfolio committee on finance, Yunus Carrim, told Moneyweb the deadline of mid-January that was set at the portfolio committee meeting with SAA on November 18 has been extended by a month.
This follows the removal of former finance minister Nhlanhla Nene and the ultimate appointment of Pravin Gordhan as his successor. Carrim said since the finance minister has oversight of SAA, the change of functionary necessitated an extension. The decision was taken after speaking to Gordhan.
Moneyweb earlier reported that SAA’s financial statements could not be finalised, as the external auditors would not sign off on its going concern status. It was due within six months of the end of the financial year, therefore on September 30 at the latest.
According to an internal legal opinion dated November 6, a funding drive aimed at restructuring SAA’s debt to re-establish it as a going concern met with headwinds, as funders had little appetite for increased SAA risk. That process was due for completion in January.
This week National Treasury confirmed that CitiBank cancelled SAA’s R250 million short-term banking facility on December 24, leaving it with severe liquidity problems. An internal SAA document indicated it would be without cash on January 15.
At the November meeting SAA indicated that it needed a further R5 billion guarantee. This application is still pending.
Carrim would not comment further on the situation at SAA, saying he could not speak on behalf of the committee.
At a post-cabinet briefing on Thursday Gordhan responded to a question about a ‘bail-out’ for SAA, saying the word is being used too loosely. The situation is much more complex, he said.
The objective is to stabilise SAA, Gordhan said. It should return to “some form of profitability, in whatever way it is possible,” he said. Some work has already be done in this regard and more will be done to implement the airline’s Long-Term Turnaround Strategy (LTTS).
Gordhan said SAA should not be a liability to the fiscus, but rather learn to stand on its own feet. This applies to all State-owned companies (SOCs), he said. Their reliance on the fiscus will in fact get great attention in the coming period, he said. “They must stand on their own feet and pay dividends to the State, because they are running as an efficient business,” he said.
With regards to SAA’s immediate liquidity problems, he said the airline has not utilised R2 billion of its R14 billion government guarantee and therefore has space to borrow.
“But to borrow they must inspire confidence in their ability to run the show and have an effective management team, functioning board and a clear goal to be profitable in less than five years,” he said.
It is public knowledge that SAA is currently operating with an interim board that has been reduced to only three members after previous directors resigned. It does not have a permanent CEO or CFO and several senior executives have been suspended or have left the organisation.
The current board has tried to defy National Treasury on several occasions and has been accused of recklessness as a result.
Gordhan said the critical aircraft leasing deal with Airbus was concluded in December and National Treasury is working with SAA “to ensure it manages its cash properly”. He said teams from the two entities meet weekly.
At the end of November deputy president Cyril Ramaphosa stated that “government is in a process of finalising the appointment of a new board of directors as part of efforts to ensure good corporate governance”.
Gordhan could on Thursday not give a timeline on the appointment of the board, saying: “Hopefully we can begin to give an indication by February 24 (when the budget is announced) of where we are going with that, as we begin to understand the issues”.