Publications
Partners
- Treasury's Asset and Liability Management Division briefed the Standing Committee on Appropriations about the situation at state-owned enterprises, including SAA.
- According to Treasury, SAA is no longer technically insolvent and had a net equity value of R1 billion at the end of 2022.
- The question still remains whether Finance Minister Enoch Godongwana will provide SAA with the money to settle the final tranche of its historic receivership debt.
- For more financial news, go to the News24 Business front page.
SAA is no longer technically insolvent, and had a net equity value of R1 billion at the end of 2022, National Treasury told Parliament on Wednesday.
This raises the key question of whether next week's national budget will see funding allocated for the embattled airline to settle the last of its legacy debt.
Treasury's Asset and Liability Management Division this week briefed the Standing Committee on Appropriations about the situation at state-owned enterprises, including SAA, Eskom, Transnet, and Denel.
According to Treasury, SAA had net group losses for the first three quarters of the current financial year, amounting to R50 million. However, it pointed out that this is a significant improvement on the predicted budgeted loss of R637 million.
SAA's legacy debt includes the third and final payment of a receivership created when SAA exited business rescue in April 2021. At the time, SAA's shareholder, the Department of Public Enterprises (DPE) estimated that about R3.5 billion was needed to cover all of SAA's legacy debt, including what was owed via the receivership liabilities. It is unclear how much is still outstanding.
All eyes are now on Finance Minister Enoch Godongwana to see if he allocates SAA the necessary funding in his Budget speech next week to enable the airline to settle the last tranche of the receivership, due by August this year.
SAA's chosen strategic equity partner, the Takatso Consortium, has made it clear that it will not take responsibility for any of the airline's legacy debt.
At the end of January this year, Minister of Public Enterprises Pravin Gordhan told Parliament that SAA has become profitable. Gordhan submitted written responses to questions by Parliament's Standing Committee on Public Accounts (Scopa). In the letter - dated 20 January and seen by News24 - Gordhan says SAA has become profitable.
However, as in the past, he said he could not provide further financial information about the airline due to legalities. He claimed to make certain financial information known could be used by SAA's competitors to obtain an unfair advantage.
SAA went into business rescue in December 2019. The following year, when the Covid-19 lockdowns were imposed, and the rescue practitioners could not get more funding from the government, all flights were halted in May 2020.
The airline exited business rescue in April 2021 and restarted commercial flights on a much smaller scale in September 2021. In June 2021, the DPE (SAA's shareholder) announced the Takatso Consortium as SAA's chosen strategic equity partner to obtain a 51% stake in the airline. Investment firm Harith and Global Airways, owner of the LIFT airline, are the Takatso partners.
The Competition Commission and other regulators are currently reviewing the Takatso deal.
Takatso is expected to inject about R3 billion over two years. This does not include SAA's so-called legacy debt, which the consortium has made clear it will not take on.
Takatso Aviation's spokesperson Thulasizwe Simelane told News24 on Thursday that the consortium would rather refrain from giving any commentary on the current operations of SAA and National Treasury's constitutionally-mandated processes of accounting to Parliament.
"With regard to any updates on the transaction itself, it is currently being considered by the Competition Commission, with our full cooperation and concurrence that the SAA that emerges out of this process must not be anti-competitive, but must strive and thrive, and be sustainable and agile in a competitive aviation sector," said Simelane.
While the Competition Commission processes are under way, Simelane says Takatso Aviation stands ready to fulfil its commitment with regard to the financing needed to fund the R3 billion operational costs that it has undertaken to, and will make, to support SAA's future operations, upon the conclusion of the transaction.
In October 2022, SAA's interim chair and CEO Professor John Lamola told News24 the airline is developing a plan to enable it can continue operating even if there is an extended or indefinite delay in finalising the Takatso partnership.
SAA is currently operating to some domestic and African destinations on a smaller scale than before business rescue. It has not restarted international flights outside of the African continent yet.
Mango not out of the woods
As for SAA's subsidiaries, Treasury told the standing committee that low-cost airline Mango is still in business rescue, focusing on securing a strategic equity partner. According to Treasury, Mango's business rescue process has gone beyond the target exit date of May 2022.
Last week, Mango's rescue practitioner indicated to creditors that he intends to go to court to try to force Gordhan to make a decision regarding a proposed buyer for the airline. Mango needs Gordhan's approval to implement the adopted business rescue plan, which contemplates SAA selling all its shares in Mango to an investor.
SAA Technical (SAAT) is technically solvent and had a positive equity value of R1.7 billion at 31 December 2022. Despite generating profits during the first two quarters of the financial year, SAAT shows a loss of R2.4 million for the financial year-to-date.
Air Chefs, on the other hand, continues to make a loss. By 31 December 2022, the loss incurred for the financial year-to-date was R6 million, an improvement on the R195 million loss incurred during the same period of the prior financial year.
* News24 reached out to the DPE for comment and was referred to SAA, which in turn indicated that it did not have comment at this stage.
