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The government will be forced to allocate funds from other initiatives to help finance the R10.4 billion it has pledged to finance a “New SAA”, according to a report by the sunday time.
The report said there are concerns that the government may decide to use funds earmarked for youth unemployment schemes as part of President Ramaphosa’s COVID-19 relief package.
Mboweni will reportedly ask other ministers to raise funds for the restructuring of the failed airline within their own budgets, although a special appropriation bill will need to be drafted to enable this action.
Major local banks have been approached to provide bridge financing for the airline’s rescue, although they have reportedly been reluctant to give SAA more financing.
The government’s resolution to once again bail out SAA with public funds has raised concerns among financial analysts, one of whom told the Sunday Times he was lucky Mboweni had not threatened to resign.
Ninety One, SA’s chief investment officer, Nazmeera Moola, told the publication that if all the government is doing is throwing more money down the drain, it will be received negatively regardless of the source of the funds.
“If SAA brings in a viable partner, who will take over the management of the airline without government interference, it could be interesting,” he said.
Treasury reluctant to finance new SAAs
Despite being reluctant to give another bailout to the failed state airline, National Treasury officials are fulfilling with orders to do so.
Sources recently told Bloomberg that the National Treasury is trying to shift funding priorities under the medium-term spending framework that expires next month to provide the remaining funds needed to get SAA back on the air.
These accounts confirmed reports that funding for the state airline would come from other government departments and programs, and may undermine efforts to revive the South African economy following the COVID-19 pandemic.
Public Enterprises Minister Pravin Gordhan has previously said that the government is “scraping all the barrels” to obtain the funds it promised to rescue the airline.
Financial analysts have expressed concern about the government’s willingness to continue investing state funds in SAA, stating that while R10.4 billion is not much compared to the large amounts invested in the airline over its lifetime, it is only the beginning of what is needed in the next few years.
Trade unions recently called that President Cyril Ramaphosa intervened in the rescue of the SAA, claiming that it was unfair that the workers were being taken “from pillar to post” and that no one takes responsibility for the latest failure to keep SAA running.
“When we met with Ramaphosa and the top six of the ANC at Luthuli House, they assured us that they supported a restructured SAA that is free of the baggage of the past and is viable,” the unions said.
“The president promised us directly that he supported SAA’s change of course, so we ask him to keep his promise.”
Government interference will hurt the “New SAA”
Outgoing Mango CEO and former SAA Acting CEO Nico Bezuidenhout commented on the government’s plan to fund SAA, stating that there should be no interference in the airline’s operations.
“I would want a situation where the shareholders manage through a board of directors and allow the company to follow a strategic direction without any interference,” said Bezuidenhout.
He added that recent government statements were tentatively positive in this regard, suggesting that there is less desire for state control over the airline’s operations.
“The government seems to be saying that it doesn’t have to directly manage and run SAA – it could be done by alternative shareholders with the government having a reduced stake,” he said.
Bezuidenhout believes that this approach would greatly improve SAA’s chances of success, stating that airlines cannot function as a government department, they must be agile and quick to react.
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