South Africa’s National Treasury will provide a $1 billion bailout for South African Airways, which has been teetering on the edge of collapse for years. But the decision to spend such a large sum of public money on the failing airline has, unsurprisingly, drawn criticism.
South African Airways is South Africa’s flag carrier and the second oldest airline in Africa, behind EgyptAir. But, for such a well-established airline, South African Airways has been nothing but trouble for the South African Government and numerous other parties that have been caught up in the airline’s controversies.
Allegations of serious, extensive corruption within South African Airways and its associate companies have hit the news frequently over the past couple of years. The situation recently deteriorated to the point where South African Airways had to slash a significant number of routes from its network in order to save money and stop its financial woes from growing any further.
As reported by CH-Aviation earlier today, South Africa’s Treasury outlined the details of a $1.06 billion (ZAR16.4 billion) bailout in its 2020 budget review released on Wednesday. The bailout has primarily been made available to ensure South African Airways can pay off its outstanding debts and interest.
In his 2020 budget speech, South Africa’s Finance Minister, Tito Mboweni, said,
“Over the medium term, authorities have allotted ZAR16.4 billion to settle guaranteed debts and interest.”
The South African government has reiterated that the $1.06 billion which will be made available to South African Airways is not a bailout. Instead, the government says that the money is financial assistance that will be used to push through a radical restructuring of the airline.
The reaction to news of the bailout
Understandably, news of such a large lump of taxpayer money being awarded to an institution that has time and time again shown no progress towards hitting targets has made a lot of people angry.
As reported by The South African, the Democratic Alliance, which is currently opposition to the ruling African National Congress, published a statement in reaction to the announcement of the bailout. It said,
“The whole business rescue of SAA was clearly a farce on the part of the ANC in an effort to prevent liquidation and keep control of SAA.”
State or private ownership?
The issue of ownership is something that has come up repeatedly during the South African Airways saga. The airline is state-owned, which would be a positive if it was actually profitable. Instead, the airline sits like a black hole in South Africa’s budget due to the fact it has not been hemorrhaging money for many years.
Recently, calls were made to consider the sale of South African Airways to a private owner, although nothing has come of them yet. While this would take a burden off the state, it would be very hard to find a buyer willing to invest in such a poorly run company with such a damaged reputation. The airline’s track record is so bad that it has gone against South African law and not released its financial statements for the past two years for fears of being immediately liquidated if they were ever made public.