🔒 Lenders give SAA a whopping R3.5bn to keep flying into March – and beyond

EDINBURGH — South African Airways (SAA) is a failed business, yet the government and other lenders have kept handing over huge sums to keep the national airline flying. Many onlookers believe it is time to ground the airline rather than throw good money after bad for sentimental reasons. But SAA boss Vuyani Jarana is adamant that the organisation can be profitable. SAA has revealed that it has secured the R3.5bn loan required to keep operating until the end of the financial year in March, says Fin24. It needs many more billions to cover its cash flow problems while a turnaround strategy is implemented over three years. SAA spokesperson Tlali Tlali told Fin24 the R3.5bn, secured from local lenders, was part of the R21.7bn funding requirement. Meanwhile, the London-headquartered Financial Times has reminded its readers that cash-strapped state entities like SAA threaten to overwhelm the country’s finances. – Jackie Cameron

By Thulasizwe Sithole

South Africa’s struggling state airline is making progress in talks to renegotiate debts due early this year as it seeks to avert the threat of closure, reports the Financial Times.
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“President Cyril Ramaphosa pledged to save South African Airways but his government has balked at the high cost of rescuing state-owned companies. Under Mr Ramaphosa’s predecessor, Jacob Zuma, SOEs became a byword for corruption and inefficiency,” points out the pink paper.

Vuyani Jarana, appointed in 2017 as chief executive of SAA, told the Financial Times: “We are looking very clearly to restructure” the R9.2bn ($640m) of debts.

The Financial Times cautions: “State-owned groups — including the power monopoly Eskom — are crucial to Africa’s most industrialised economy, but their mostly government-guaranteed debts threaten to overwhelm public finances unless Mr Ramaphosa reforms them.”

The airline has been briefing its lenders on its plans for achieving a “path to profitability” to persuade them to accept delays in debt payments due in March.

“Easing pressure on SAA debt is critical as South Africa’s finance minister Tito Mboweni has signalled the state cannot afford to continue bailing out the lossmaking group,” continues the FT.

“Mr Mboweni said last year that SAA should instead be closed and a new airline started. Mr Mboweni’s comments reflected frustration among South African taxpayers over repeated bailouts for SAA, which slid into financial ruin under Dudu Myeni, the airline’s former chair and Mr Zuma’s close ally.

She left SAA last year before the ruling African National Congress removed Mr Zuma from office. SAA has not turned a profit since 2012 and made losses of R5.7bn during the latest financial year.”

Under Jarana’s rescue plan, SAA is expected to break even in 2021 by overhauling wasteful supply chains and contracts that were allegedly used to dole out patronage under Myeni. “This is not misplaced optimism,” Jarana is quoted as saying.

“We’ve shown that there is a board and management that is really focused on getting things done. We would like to do things a lot faster … but these are long legacy issues, long-term contracts” that cannot be easily abandoned, he reportedly added.

Jarana slammed comments that create an impression that the airline is going to die tomorrow. “In fact we are here for the long haul … if [customers] have a sense we are not going to be there, they are not going to book with us,” Jarana said.

He dismissed criticism that SAA had made a strategic mistake by focusing on Johannesburg as its main hub over Cape Town, South Africa’s second city and biggest tourist draw.

“SAA still saw Johannesburg as a gateway for the region even as airlines in rival hubs such as Addis Ababa have eaten into the southern African travel market, he said. Despite speculation that the government had deterred Mr Jarana from pursuing a more radical turnaround, he denied that he faced political interference,” added the FT.

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