Treasury to give SAA R10 billion in special appropriation

08:10 (GMT+2) Thu, 14 Sep 2017

PARLIAMENT, September 13 (ANA) – National Treasury has agreed to give South African Airways a special appropriation of R10 billion by the end of September, director-general Dondo Mogajane told MPs on Wednesday.

“It will be for R10 billion, we have decided, because that will cover everything,” hee said during a briefing on the ailing airline’s latest quarterly results to Parliament’s standing committee on finance.
The appropriation bill is due to be tabled in a special sitting and Mogajane said he hoped the legislature would agree to the measure, adding that the treasury would be forced to look at a “Plan B” if MPs refused to support it.

Mogajane said nine lenders have agreed to roll over debt that would become due at the end of the month, while Citibank has agreed to roll over a portion of the R1.761 billion the loss-making airline is due to repay by the 30th of September.

Some of the R10 billion will serve as working capital for the airline for the remainder of the financial year, while the rest will be used to pay lenders and service providers, according to Mogajane and chief financial officer Phumeza Nhantsi.

SAA relies on government guarantees of R20 billion and needed government’s help in July to cover its debt. Treasury paid R2.2bn to Standard Charter earlier this year, with money taken from government’s emergency fund.

Treasury’s announcement follows much speculation about the form of further financial aid to the airline, following a leak of a proposal to sell Telkom’s shares to recapitalise SAA.

Mogajane said the bill would not be linked to the proposed sale, which would raise an estimated R14 billion.

The briefing saw SAA concede that none of the five assumptions on which it has based its turnaround strategy had materialised.

These were SAA being a going concern, debtors extending terms for a minimum of three years, government giving a capital injection of at least R13 billion over three years, as well as the retiring of five excess wide-body aircraft and the retention of all the narrow-body aircraft in its fleet.

One of its narrow-body aircraft have been retired and five more would follow by the end of the month.

This will lead to a reduction of 37 percent of its share of the local market and four percent of the international market but is meant as part of cost-saving measures.

Nhantsi said overall costs were reflecting an improvement compared to the last financial year but the airline remained beleaguered by stagnant revenue growth and rising finance costs.

– African News Agency (ANA)