SAA financial ‘black hole’: Billions lost, far worse than anyone thought – Parliament

The amount of taxpayers’ money that is disappearing through SAA is is staggering. The number is so huge, and growing, that it is hard to comprehend the scale of cash being lost to keep the national airline in business. Parliamentarians heard today that the losses for the 2014/15 financial year were roughly R1bn more than anyone was expecting. What’s more, this number could grow as a result of SAA’s alleged anti-competitive behaviour. The financial mismanagement, managerial incompetence and nepotism that have characterised the running of an airline that was once one of the world’s finest is breathtaking and once more begs the question: How on earth has Dudu Myeni managed to secure her position at the SAA chair? She may be President Jacob Zuma’s friend, but surely even the country’s top leader can see that the former teacher is not equipped for the role and her continued tenure is an embarrassing blight on his own reputation?   – Jackie Cameron

By Liesl Peyper

Cape Town – SAA’s loss for the 2014/15 financial year was R5.6bn — close to R1bn more than the expected amount of R4.7bn.

This emerged when the national carrier presented its 2014 to 2015 interim financial statements to parliament’s standing committee on finance on Tuesday.

Duduzile Myeni, chairwoman of South African Airways (SAA), speaks during a visit to the company's offices by South Africa's President Jacob Zuma in Johannesburg, South Africa, on Friday, May 6, 2016. It appears to be just a matter of time before South Africas credit rating is cut to junk. Photographer: Waldo Swiegers/Bloomberg
Duduzile Myeni, chairwoman of South African Airways (SAA), speaks during a visit to the company’s offices by South Africa’s President Jacob Zuma in Johannesburg, South Africa, on Friday, May 6, 2016. Photographer: Waldo Swiegers/Bloomberg

Finance Minister Pravin Gordhan said in Parliament last week that SAA’s loss for 2014 to 2015 would amount to R4.7bn. However, when the airline tabled its preliminary financial results late on September 15, Gordhan pointed out that there had been technical difficulties which could result in material changes to the financials.

On the day when the airline submitted these financial statements – a year overdue and more than 18 months after the end of the previous financial year –  the report didn’t contain the auditor’s report and could still be subject to changes.

Two matters that were expected to have a significant effect on the financial statements are the anti-competitive claims lodged by Nationwide and Comair airlines that are likely to cost SAA more than R1.1bn in penalties. Originally, the airline didn’t make provision for these penalties.

The courts ruled in favour of Nationwide who received a damages claim of R104.4m.

In the Comair case against SAA the airline put forward a damage claim totalling R898m, but it also asked the court to add 15.5% interest, which could increase the total in damages to R2bn.

In both cases SAA is sued for entering into agreements with travel agents from 2001 to 2005, whereby it paid them to divert customers to SAA rather than other airlines.

SAA acting chief financial officer Phumeza Nhantsi said in her financial presentation before parliament that for the current financial year, SAA managed to limit its loss to R1.4bn. “This is a huge improvement, compared to the previous year,” she said.

SAA acting chief executive officer Musa Zwane said the national carrier was able to present its 2015 to 2016 financial results to National Treasury on Sunday. Therefore, Nhantsi was able to give a brief overview of the financials of the current financial year.

She pointed out that SAA’s revenue remains stagnant at R30.3bn, but that the situation was much better than the previous financial year when SAA faced impairment costs of R1.9bn. Impairments for the 2015 to 2016 financial year was estimated at R158m.

If South African Airways had not received a R5bn going concern guarantee, it would have posed a systemic risk to all state-owned enterprises (SOEs) in South Africa, Deputy Finance Minister Mcebisi Jonas said on Tuesday. 

Jonas, who made a few introductory remarks, was part of a delegation from National Treasury and SAA who briefed Parliament’s Standing Committee on Finance on the airline’s preliminary financial statements for 2014-15. 

He said SAA would have been unable to finalise their financial statements without a guarantee. “But it would have been been prudent to give that kind of support without first mitigating the fiscal risk.” 

Jonas pointed out that SOEs’ financial position poses a significant risk to South Africa’s fiscal position. In fact, the financial well-being of all CEOs is being taken into account when rating agencies assess South Africa’s credit risk. 

Before handing over to acting CEO Musa Zwane, Jonas said the R4.7bn guarantee SAA received put the airline in a position to finalise sets of financial statements for both 2014-15 and 2015-16. 

The 2015-16 financial statements would be finalised before September 30 this year, Jonas said. 

Sources:

http://www.fin24.com/Companies/Industrial/saas-losses-for-201415-almost-r1bn-more-than-r47bn-guarantee-20160920

http://www.fin24.com/Companies/Industrial/r5bn-saa-guarantee-staved-off-risk-for-all-soes-jonas-20160920

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