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The civil society group Outa has called on the government to liquidate South African Airways (SAA) instead of investing more money in the failed airline.
After last week’s SAA creditors meeting and reports of the airline’s dire financial situation, the group said SAA “borders on dire straits” and that it would be incredibly difficult to try and keep the airline at float.
The group said the government’s actions are simply a case of kicking the can down the road, and that the costs of this add an unnecessary burden to taxpayers at a time when the country can least afford it.
“It is clear to us that the state is having a hard time finding private partners to take the majority stake.
“Outa believes that current bailout options will become a bigger problem for the taxpayer unless the airline is liquidated and a new international airline is licensed, majority-owned by the private sector and with the state taking no more than 25% of participation”. said Julius Kleynhans, executive manager of Outa Public Governance.
Outa said a new international start-up airline would cost relatively less, with jets leased to take four to five strategic intercontinental routes and possibly some regional routes.
The group said the government’s role should be an enabling one that stimulates competitiveness in the local market and possibly helps with the partial subsidization of some routes to stimulate tourism and business in remote areas.
“Current financial requirements of more than R10 billion are required to cover debt and operating costs intended simply to keep SAA limping.
“We believe that a humanitarian severance package for staff and debt settlement agreements should be sought with current creditors, and the government should withdraw and liquidate SAA as soon as possible.”
Outa said that SAA’s business rescue plan requires R24.9 billion to pay off the debt and R2 billion to restart SAA with a workforce of 1,000 employees. Approximately R16.4 billion will be reimbursed in three years (mentioned in the 2020 Annual Budget), and the government is trying to mobilize another R10.5 billion to implement the R26.9 billion requirement of the business rescue plan.
“We believe that these figures may be insufficient to resurrect the airline,” Kleynhans said.
Outa says he has written to the Minister of Public Enterprises, Pravin Gordhan, seeking further clarification of the underlying assumptions of SAA’s restart business plan to determine the likelihood of SAA’s future sustainability and the extent to which SAA’s losses would have. to depend on taxpayer funding. .
“However, for the sake of time and following our own investigations and assessments of the situation, we cannot see how this issue should continue to be crafted in the way it has been done to date,” he said.
“Every day that the state holds out and SAA remains in limbo, the South African economy loses millions of rand.”
SAA will not be liquidated
The Department of Public Companies (DPE) has confirmed that the government will change funding priorities to finalize the restructuring of South African Airways (SAA) and the implementation of the airline’s commercial rescue plan.
An announcement to this effect will be made in the Adjustments Appropriation Bill, which will soon be submitted to Parliament, the department said in a statement on Friday afternoon (September 18).
“The national airline will not be liquidated,” he said. “As the restructuring process should be nearing completion in the next few weeks, lenders will be asked to finance the restructuring process and honor the commitments of voluntary severance packages and downsizing. “
At the same time, DPE said it will continue to evaluate the 20 unsolicited expressions of interest from private sector funders, private equity investors and partners for a future restructured SAA.
“The DPE is sympathetic to the plight of SAA employees as it continues to work with other government departments, including the National Treasury, to ensure that the airline’s restructuring plan is successfully implemented.
“In charting the way forward, the DPE believes that the key to resolving the difficulties SAA faces is the completion and implementation of the business rescue process, followed by the start of a restructured airline, the appointment of new non-executive directors and a team leadership and securing a credible strategic capital partner who can bring the necessary technical, financial and operational expertise to the business. “
Read: Government to help finance SAA bailout
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