South Africa Puts Aside More Money For Struggling SAA

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The South African Government has thrown cash-strapped South African Airways another lifeline. $212 million has been “provisionally” set aside by the government for the airline this current financial year. This comes despite earlier assurances from the government that there would be no more money for the state-owned carrier.

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$212 million has been provisionally set aside for South African Airways this financial year. Photo: Getty Images

Airline grounded, out of money, and funding halted

South African Airways has been in the local equivalent of Chapter 11 since late 2019 with the aim of restructuring the airline into a more sustainable ongoing concern. South African Airways has been mired in financial, management, and government interference problems for years.

In April this year, the South African Government declined to provide any more funding or financial guarantees for the airline.

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“On 14 April 2020, the business rescue practitioners received a response from government … that government is unable to provide additional funding to sustain the business rescue process,” said a report in Reuters.

In March, the airline had halted its international operations in the face of the pandemic. The outlook for South African Airways was poor. Shortly afterward, domestic flight operations stopped, and the airline’s CEO, Zuks Ramasia, resigned after a short nine-month tenure.

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With planes grounded the prognosis for South African Airways was grim. Photo: Getty Images

Government frustration at the slow pace of business rescue

The pundits were writing the airline off. It had already received over $1 billion in bailouts over the past three years. But South African Airways enjoys strong government support and is like a cat with nine lives. Despite the airline undergoing restructuring, the South African Government was proving resistant to any sale of assets or talk of liquidation. This was despite them declining to continue funding the national carrier.

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Amid rising frustrations at the slow pace of the restructuring process being carried out by global professional services firm Alvarez & Marsal, the South African government last week asked for a business plan to be delivered within 25 days.

The chairman of the Standing Committee on Public Accounts, Mkhuleko Hlengwa, said last week;

“The more they provide answers, the more questions arise. It is a case of classical musical chairs. It’s what has characterized the operation over the past five months. It’s what has landed us with a Rand 10 billion bill.”

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The ongoing relationship between the minister responsible for the airline, Pravin Gordhan, and the firm restructuring South African Airways is said to be “tense.”

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The South African Government is said to be frustrated at the slow pace of the business rescue. Photo: Getty Images

Funding halt reversed, ‘provisional’ funding set aside

Now the government appears to have reversed its April stance of no more funding. FlightGlobal is reporting that $212 million has been set aside for South African Airways this financial year. A further $9 million has been set aside for offshoot SA Express. The South African financial year runs from March 1 to the end of February.

Deputy Director-General of the Department of Public Enterprises, Kgathatso Tlhakudi, quoted this amount when appearing before the parliamentary portfolio committee on public enterprises on Wednesday.

There are also ongoing financial allocations for the 2021-22 and 2022-23 financial years.

At first glance, that might appear to lock in South African Airways for the next few years at least. But these allocations are “provisional,” and the South African Government is notorious for promising funding that doesn’t materialize.

That said, it’s a state of play the management of South African Airways is used to. So while the airline might have one foot in the grave, the whole body isn’t in there yet. Given South African Airways’ record, it is probably premature to start filling in the grave quite yet.

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