National Treasury has announced that it has come to South African Airways’ aid, by bailing the failing airline out of a R2.2 billion debt payment that it could not get an extension for.
The payment was made to Standard Chartered, which refused to extend a loan facility, and has been made in terms of section 16 of the PFMA which makes provision for the use of funds in an emergency situation as follows:
“[T]he use of funds from the National Revenue Fund to defray expenditure of an exceptional nature which is currently not provided for and which cannot, without serious prejudice to the public interest, be postponed to a future parliamentary appropriation of funds.”
The PFMA requires that such a payment must be reported to Parliament within 14 days and must be included in an adjustments budget within 120 days of the Minister authorising the expenditure.
Treasury said a default by SAA would have triggered a call on the government guarantee‚ leading to a depletion of the National Revenue Fund in any event and “possibly resulting in elevated perceptions of risk related to the rest of SAA’s guaranteed debt”.
The DA has criticized the move, saying that earlier in the week, National Treasury was asked whether they were ready to meet the guarantee obligations .
“Both SAA and National Treasury reassured the parliamentary Standing Committee on Finance that the plans were in place to meet the R 9,0 billion SAA loan payments by 30 June 2017. This was clearly not the case,” the party said.
“Standard Chartered Bank evidently has no faith in the leadership, management and strategy of South African Airways.”
SAA has been surviving on government bailouts for several years, and is losing as much as R370 million a month, with no clear indication of making good on its 5-year turnaround strategy.