BA-flying Dudu Myeni faces axe as taxpayers lose R12m per day on broke SAA

JOHANNESBURG — Another year, another SAA billion-rand bailout. Over the weekend, Treasury announced that SAA would receive a R2.2bn bailout to avoid a default with Standard Chartered. What is shocking is that SAA is losing over R12m per day (over R300m per month). This is an untenable situation for taxpayers and the situation is made even worse when cronies such as Dudu Myeni are front and centre when it comes to problems at the airline. Last week, it emerged that Myeni flew BA first class to get from Durban to Cape Town for her Parliament briefing. This was reportedly because there weren’t any first-class SAA seats on that route for her. Now, Myeni is coming under pressure. Let’s hope Parliament comes to its sense and boots her out. An even better decision would be to sell the airline, but in Zuptastan that’s unlikely to ever happen. – Gareth van Zyl

By Matthew le Cordeur, Fin24

Cape Town – Parliament’s standing committee on finance chairperson Yunus Carrim has called for a review of the South African Airlines (SAA) chairperson position following yet another multi-billion rand bailout.

This follows the announcement by Treasury on Saturday that SAA will receive a R2.2bn bailout to repay its debt to Standard Chartered Bank to avoid defaulting.

The bailout has added more pressure on embattled SAA board chairperson Dudu Myeni, after the Companies Tribunal last week dismissed her application to have a compliance notice issued by the Companies and Intellectual Properties Commission set aside.

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 on May 6, 2016. Photographer: Waldo Swiegers/Bloomberg

This ruling will “add weight” to a court application by the Organisation Undoing Tax Abuse (OUTA) to have Myeni declared a delinquent director.

Finance Minister Malusi Gigaba hinted that Myeni’s role at SAA could come to an end at the airline’s annual general meeting this year.  “At the upcoming AGM, we will attend to the matter of appointing her successor,” he told media in June.

Adding more pressure, Carrim said in a statement on Sunday that the committee wants “the position of the board chair (to) be reviewed”.

He also called on the board to be strengthened with “people with the necessary aviation expertise and experience” and that a chief executive be appointed as soon as possible.

“Government should appoint the best person available for the post. The SAA management as a whole has to be considerably strengthened.”

Treasury has failed oversight role – Carrim

Carrim also blamed Treasury for failing its oversight role of SAA.

“We believe that Treasury is failing in its oversight role of SAA, and we are going to be far more effective in our oversight role over Treasury and the SAA,” he said.

“We are to meet with them in early August when Parliament reconvenes and again in September. We are especially concerned that SAA has been losing R370m a month at the moment.

“The finance committee will want to know what exactly Treasury is going to require from the SAA board in return to ensure that it functions far more effectively.”

His views echo those of committee member Democratic Alliance MP Alf Lees, who said it was a “blow to the credibility of both the SAA board and to National Treasury”.

“This emergency funding for SAA indicates the serious crisis that SAA has been mismanaged into,” he said  in a statement on Saturday. “This taxpayer bailout makes no difference to the cash crisis at SAA.”

Government had no choice but to give SAA bailout – Carrim

Carrim said government had “no choice but to bail SAA out”.

“Not to have done so would have been far worse, not just for SAA, but the country as a whole,” he said. “In any case, the government has for some while now been considering a capital injection into SAA. The need to repay the Standard Chartered Bank loan prompted this decision sooner.”

Read also: As losses mount, Dudu Myeni asks: What the devil is going on at SAA?

Carrim said the committee will want the board’s turnaround strategy to be finalised as soon as possible and brought to the committee.

“While the majority in our committee does not support the privatisation of SAA, we believe that there are a variety of other ways to ensure effective private sector participation in SAA, and we urge Treasury and SAA to finalise their proposals on this.

“The committee does not have the forensic and other capacities to investigate allegations and counter-allegations of corruption within SAA and we urge that these be referred to the police and that the criminal justice system acts swiftly on these matters.”

Source: http://www.fin24.com/Companies/Industrial/myenis-time-at-saa-running-out-as-broke-airline-gets-another-bailout-20170703

SAA gets urgent R2.2bn bailout as it bleeds millions every month

By Fin24

Cape Town – South African Airways (SAA) has received yet another lifeline from Treasury, this time about R2.207bn for the embattled state-owned carrier to repay its loan to Standard Chartered Bank.

SAA received a R5bn going concern guarantee in September 2016, after a new board was appointed.

The bailout comes after National Treasury director general Dondo Mogajane told Parliament this week that he was confident that the loan would be repaid by the June 30 deadline.

“Government has decided to transfer funds from the National Revenue Fund (NRF) to South African Airways to allow the airline to pay back its debt to Standard Chartered Bank thereby avoiding a default,” Treasury said in a statement on Saturday.

File Image: Coffers may be running low but SAA has already received R14bn in taxpayer funded bailouts. More magic available at jerm.co.za.

“A default by the airline would have triggered a call on the guarantee, leading to an outflow from the NRF and possibly resulting in elevated perceptions of risk related to the rest of SAA’s guaranteed debt,” it said.

SAA previously acknowledged in a statement that R9bn will be due and payable to “one lender”. Although SAA did not want to name the “lender”, it is alleged to be Standard Chartered Bank which has declined to renew SAA’s loan facilities.

Blow to credibility of SAA and Treasury – DA

Democratic Alliance SAA spokesperson Alf Lees said this was a “blow to the credibility of both the SAA board and to National Treasury”.

“Only three days ago when I asked National Treasury 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 9bn SAA loan payments by 30 June 2017. This was clearly not the case,” he said in a statement on Saturday.

“Standard Chartered Bank evidently has no faith in the leadership, management and strategy of South African Airways,” he said.

“This emergency funding for SAA indicates the serious crisis that SAA has been mismanaged into,” he said. “This taxpayer bailout makes no difference to the cash crisis at SAA.

“SAA is losing in the region of R370m every month and is apparently scratching for cash to pay salaries,” he said.

Finance minister has 14 days to explain bailout

Treasury said the payment was done in terms of section 16 of the Public Finance Management Act (PFMA).

“This section of legislation states that the minister can authorise the use of funds 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,” it said.  “The due process laid out in the legislation will be followed.”

Malusi Gigaba reacts during a news conference in Pretoria, South Africa, on Saturday, April 1, 2017. Photographer: Waldo Swiegers/Bloomberg

The PFMA 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.

“We look forward to the minister’s (Finance Minister Malusi Gigaba) report to Parliament within 14 days,” Lees said. “This report must give details of why this expenditure was authorised as being an emergency situation.”

A last resort

Treasury said that improving the financial positions of the airline through recapitalisation has been on government’s agenda for a while as outlined in the February 2017 Budget.

“Several options are being explored and an update will be provided during the Medium Term Budget Policy Statement in October 2017,” it said. “Given the nature of the problems at SAA, section 16 of the PFMA had to be used as the last resort.

Read also: SAA boss Dudu Myeni: ‘I’m a transformation hero’ – read her astonishing letter to Parliament

“Government will do everything in its power to ensure that the airline’s turnaround strategy is implemented.

“The airline remains a strategic asset and in its role as the flag carrier, it serves as an economic enabler with direct and indirect benefits across a wide range of economic activity.”

The bailout will add more pressure on embattled SAA board chair Dudu Myeni, after the Companies Tribunal this week dismissed her application to have a compliance notice issued by the Companies and Intellectual Properties Commission set aside.

SAA in talks with PIC over loan

This week, SAA confirmed it is in discussions with the Public Investment Corporation (PIC) for a loan, as the national carrier wants to diversify its debt portfolio, said its chief financial officer Phumeza Nhantsi.

SAA was appearing before the standing committee on finance on Tuesday about its quarterly report and turnaround plan.

In an initial document, distributed to committee members on Monday, SAA stated that it made a loss of R734m year to date, which is for the months of April and May 2017.

Nhantsi told journalists after the briefing that the remaining debt obligation after negotiations is R2.3bn and that SAA managed to negotiate that the balance be rolled over.

She pointed out that it is not a case of lenders “recalling” SAA’s loans. “The loan is maturing and one of the lenders said it would not extend the loan.”

Asked if SAA has the cash reserves to honour the repayment, Nhantsi said SAA is working with government to “find a solution”.

Source: http://www.fin24.com/Companies/Industrial/saa-gets-urgent-r22bn-bailout-as-it-bleeds-millions-every-month-20170701