Government refuses SAA business rescuers' request for R10bn
The government has turned down a request from SAA's business rescue practitioners for R10bn in extra funding.
In a leaked letter addressed to Les Matuson and Siviwe Dongwana, the airline's business rescue practitioners, public enterprises minister Pravin Gordhan says the government will not provide any further funding to the business rescue process of SA's national airline.
“Your request for a prescribed limit under the PFMA [Public Finance Management Act] for further funding of R10bn for the business rescue process dated April 2, the following response pertains ... government will not support the extension of the foreign currency borrowing limit to perform foreign financing of the business rescue plan, nor for a care and maintenance budget, as you have proposed,” the minister wrote in the letter, dated April 10.
“There is therefore no funding available from foreign sources.
“Further note government is unable to provide additional funding to sustain the business rescue process beyond the funding that has already been provided to the airline in the form of post commencement finance.”
Lending guarantees will also not be provided in respect of the business rescue process, said Gordhan.
The Covid-19 pandemic has “further stretched” resources in the government's efforts to mitigate its impact on people's health and on economic activity, said the minister.
“As you are well aware, the pandemic has been devastating for the airline industry globally, and as we have discussed, the business rescue practitioners must consider their options within their available resources,” he wrote.
In a press statement issued on Tuesday evening, Gordhan said his department continues to engage the business rescue practitioners and other stakeholders, including unions, to explore options going forward with the necessary urgency. He said the government would keep all stakeholders informed of further developments.
“The post Covid-19 economic environment has created great uncertainty in global air travel, putting air travel globally and in SA at risk,” he said.
“Aviation is a fragile but critical sector of our economy, as it enhances both human and business activities. Our economy needs a more viable and sustainable aviation or airline industry that can contribute to SA’s economic growth and development.
“It is in this context we are of the firm conviction that South Africa needs a viable and sustainable set of airlines. Sustaining them needs to be considered in the context of the great uncertainty about the recovery in air travel globally and in SA.
“Working with the business rescue practitioners, government must urgently determine the operating and business model for a rescued airline, with a sustainable financial model.”
SAA was placed under voluntary business rescue in December, and received R3.5bn emergency fund from the Development Bank of SA in January.
Gordhan has previously told parliament that its finances were so bad that if the annual financial statements and the annual report were to be tabled in parliament, the airline would effectively go into liquidation.