Finance minister Malusi Gigaba says that the R2.2 billion emergency bailout for South Africa Airways isn’t such a free ride, and important, urgent decisions need to be made to turn the business around.<\/p>\n
Gigaba faced criticism over the weekend for signing off on yet another multi-billion rand bailout for the failing airline, without attaching stringent conditions to the agreement.<\/p>\n
Speaking at a media briefing on Monday, the finance minister said that the funds were procured through emergency channels, and that this still needs to be accounted for to Parliament.<\/p>\n
He said that at least one of the conditions attached – which has been a condition for some time – is that SAA hire a permanent, and stable CEO. Recent media reports point to\u00a0Vodacom executive director of regional operations, Vuyani Jarana, as the favoured candidate.<\/p>\n
Gigaba said that government needs to urgently resolve the SAA ‘dilemma’, as the airline kept failing to demonstrate any responsibility, and Treasury was ‘sick and tired’ of supporting it.<\/p>\n
He said that the airline was extending jet fuel contracts, which were proving to be very expensive, and that decisions needed to be taken to turn things around. A Treasury task team would be established to implement a turnaround strategy.<\/p>\n
According to economist Mike Schussler, this is now the third major bailout of SAA – and each time the airline promises it will be last, but it never is.<\/p>\n
The latest financial year data available (for 2015), showed the airline posting a R1.9 billion loss – an increased loss from R1.5 billion the year before. Early indications in 2017 pointed to the airline posting a loss as high as R4.5 billion in the 2016 financial year.<\/p>\n
The airline continues to lose R370,000 a month.<\/p>\n
The emergency bailout had to be implemented as one of SAA’s financiers, Standard Chartered, reportedly denied the airline’s application to extend the loan facility.<\/p>\n
According to Schussler, this spells bad news for not only SAA’s credibility, but also for all SOEs and South Africa as a whole. He warned that ratings agencies will have taken notice, and that Gigaba has likely factored in another credit downgrade.<\/p>\n
Gigaba, however, said that Standard Chartered declining to extend SAA’s loan was not a reflection of a lack of faith in South Africa – only in SAA.<\/p>\n