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The government will partner with the private sector in the launch and management of the new SAA. (Yunus Mohamed / Photo24)
- Finance Minister Tito Mboweni announced in his medium-term budget that the state airline has been allocated R10.5 billion to allow it to continue with its long-delayed corporate rescue plan.
- Public Enterprise Minister Pravin Gordhan says the state will partner with the private sector in launching the “new” SAA.
- Gordhan says the failure to allocate the funds would have resulted in the liquidation of the airline at a cost of more than R18.5 billion.
Public Enterprises Minister Pravin Gordhan says the government will partner with the private sector in launching a new SAA in the middle of next year.
Finance Minister Tito Mboweni announced in his medium-term budget that the state airline has been allocated R10.5 billion to continue with its business rescue plan. The flag carrier was already placed on corporate bailout in December 2019, before the coronavirus pandemic caused a sharp contraction in global air travel.
In a statement issued by the Department of Public Enterprises on Thursday, Gordhan welcomed the government’s commitment to provide the funds.
Gordhan said he was “shocked and disappointed” by what he considers to be a manipulation of the facts about SAA. In response to criticism of the financing, he argued that the failure to allocate the funds would have resulted in the liquidation of the airline at a cost of more than R18.5 billion.
Furthermore, according to the minister, the liquidation would have meant that SAA employees would have been in a worse situation than with the business rescue plan, as they would have received a maximum payment of approximately R32,000 per staff member, regardless of years of service , to the extent that funds are available. Furthermore, they would only have received payment once the final settlement and distribution account had been approved, which could take up to 24 months.
Gordhan’s statement made no mention of government assistance for employees of state-owned regional airline SA Express, which is in provisional liquidation.
Thanks to the R10.5 billion allocation, an interim board and interim CEO and CFO will now be appointed for SAA, Gordhan said. The statement does not indicate the status of Philip Saunders, who was appointed interim CEO a few months ago.
“The DPE is constructively engaging with the national interest goal of forming a new airline in the first half of 2021, to be run in a professional and sustainable manner to support key economic sectors, including tourism, and solidify to South Africa as an African Gateway to international markets, “the statement read.
Although the funds were eventually allocated to SAA, it may not be long until bridging capital is raised, probably from the banks. This is because the money allocated in the medium-term budget will only be available in January of next year.
Mboweni indicated during a post-budget briefing that the R10.5 billion is not for starting a new airline, as it is “still an ongoing process” between the relevant spheres of government, while denying that the funds constitute a “rescue”. .
