The state-owned enterprise that stopped publishing annual reports but still got billions in bailouts

South African Airways (SAA) stopped reporting its finances for several years in South Africa but still received billions in government bailouts.

SAA stopped publishing reports when it entered business rescue in 2019. This came after the SOE struggled with liquidity challenges, negative publicity and a weak balance sheet.

The problems were so bad that the group was technically insolvent, meaning that its assets would not be enough to pay off its liabilities if it were liquidated.

Upon entering business rescue in 2019, SAA failed to publish any annual reports from 2017/18 through to 2021/22 financial years.

In early 2020, Former Public Enterprises Minister Pravin Gordhan said that the finances would not be made publically available amidst the fears that their release would force the SOE into liquidation.

Gordhan stressed that the government was entering unknown territory as SAA was the first SOE to ever be placed under business rescue.

At the time, parliament said that it understood the consequences related to premature exposure of the financial statements.

However, it stressed the importance of publishing them to understand what led to SAA’s financial struggles. It said that the joint committee was left in the dark without the relevant reports.

Pressure would continue in the following years, with many members of parliament concerned about the lack of transparency at SAA.

The operating environment would only get worse for SAA from Gordhan’s comments in 2020, with the airline having to contend with the COVID-19 pandemic.

The group was forced to suspend all international flights due to the pandemic and underwent extreme cost-cutting measures as part of its business rescue process.

The airline had to offer severance packages to the majority of its workforce. By 2021, the group would exit business rescue proceedings but required massive cash injections.

Although SAA is a “luxury” SOE and not entirely necessary to the running of South Africa, it still received billions in government bailouts, second only to Eskom.

Between the 2018/19 and 2022/23 financial year, SAA received R37 billion rand in bailouts. The most came in 2020/21 when South Africa was deep in the pandemic.

The latter bailouts also came amidst plans by the government to sell a large stake in SAA, with part-privatisation of the entity a central aim for Gordan, who passed away in 2024.

However, following three years of negotiations with the Takatso Consortium, which included Global Airways and private equity firm Harith General Partners, the deal was called off last year.

The deal would have seen the Consortium take over 51% of the struggling entity. However, the government believed that it would not get fair value for SAA’s assets if it proceeded with the deal.

Signs of life

Despite the struggles of SAA, recently released data points to a better performance from the group, with it even posting a profit.

In early 2024, several past unreleased results were released to the public, showing a combined loss of R23.5 billion from 2018/19 to 2021/22.

This was made up of before-tax losses of R6.5 billion in 2018/19, R5.7 billion in 2019/20, R7.6 billion in 2020/21, and R3.7 billion in 2021/22.

Notably, reports from the Auditor General showed that between March 2019 and March 2022, SAA lost R44.4 billion due to corruption.

The Auditor General also questioned the reliability of the financial reporting and issued several disclaimers.

The entity is now under the oversight of Transport Minister Barbara Creecy after the Public Enterprise portfolio was closed.

However, the airline, together with its subsidiaries, posted a net profit of R252 million in 2022/23. Total revenue also increased by 183% to R5.7 billion over the period.

The 2022/23 financial year was the first fiscal period of commercial operations for SAA since it exited business rescue in 2021.

Over the last two years, SAA has also increased the number of international flights from South Africa. This includes flights to Perth, Australia; Sao Paulo, Brazil; Mauritius; and more.