Hidden costs of SAA scandals exposed: Leaked report

Miley Cyrus-style caricatures of SAA board chairperson Dudu Myeni highlight that at best she has a very clumsy approach to running the national carrier. Behind the fun and games lies an ominous tale of financial shenanigans that have worrying implications for South Africa in general. Indications from leaked reports into SAA’s financial records suggest that billions of rands are needed before the end of the year to keep the airline afloat. As if that’s not enough, the fall-out from various SAA scandals could deal another blow to South Africa’s reputation as an investment destination, warn commentators.The possibility that SAA’s problems could play into a ratings downgrade for the country comes as emerging markets rise up the radar for international investors looking for higher returns than they can expect in Europe. – Jackie Cameron

From Fin24

Cape Town – A glimpse of a South African Airways (SAA) report reveals that the national carrier is bleeding money.

The quarterly report that Business Day has had sight of is the first financial information about the airline to reach the public domain for 18 months, as SAA has not finalised its annual financial statements for 2014-15.

Zapiro's animated look at how SAA chairwoman Dudu Myeni and President Jacob Zuma are literally wrecking the South African economy. More wizardry available at zapiro.com.
Zapiro’s animated look at how SAA chairwoman Dudu Myeni and President Jacob Zuma are literally wrecking the South African economy. More wizardry available at zapiro.com.

The report reveals that SAA made a net loss of R1.38bn in this period, a figure that was reduced by cost cutting measures such as route cancellations and retrenchments.

It reveals that SAA needs a going-concern guarantee of around R5bn to finalise its financial statements for 2014-15 and could need a further guarantee for the 2015-16 financial year.

“Although the airline has used up all but R99m of the R14.394bn guarantees provided since 2007, according to the quarterly report, it was unlikely to run out of guarantee capacity,” the report said. “SAA will, however, need new funding by December.”

SAA chairperson Dudu Myeni. Picture: Twitter @Netwerk24
SAA chairperson Dudu Myeni. Picture: Twitter @Netwerk24

DA demands SAA publish annual report

The leaked report comes as the stalemate between Finance Minister Pravin Gordhan and SAA board chairperson Dudu Myeni is rapidly driving SAA to total collapse, according to the Democratic Alliance (DA).

DA shadow deputy minister of finance Alf Lees said the tabling of SAA’s annual financial statements is no longer a question of time, but a matter of a “very much delinquent board”.

He was reacting to Parliament’s tabling last Monday of Gordhan’s letter requesting a fourth extension in the last 10 months for a delay in the deadline for the tabling of these results.

He said the DA formally requested the chairperson of the Standing Committee on Finance, Yunus Carrim, to seek a legal opinion regarding Parliament’s authority in law to grant such an extension.

Read also: When it looks, smells like a pig – usually is. Tale of the SAA whistleblowers

“It is in our contention that there is no provision made in the Public Finance Management Act whereby Parliament is given the authority to extend the deadline. Parliament must give effect to this deadline and interrogate these long overdue financials.”

SAA has received a number of government bailouts worth at least R14.4bn as part of its turnaround strategy, but Gordhan warned in January the carrier cannot become a liability on the fiscus.

SAA could lose billions in savings over halted deal

The financial statement leak comes a day after the Sunday Times reported another controversial move by the SAA board, following the cancelled BnP Capital deal in June and the wobbly Airbus swap deal in December 2015.

SAA and its low-cost airline Mango could lose billions of rands for not concluding a direct lease agreement with Macquarie, an international aviation firm.

The SAA board allegedly rejected a deal with Macquarie that would have saved SAA R1.3bn and Mango R1bn, the Sunday Times reported.

SAA leases four Boeing 737s from Macquarie and then sub-leases these to Mango. In the halted deal, Mango wanted to extend this lease and hire two more 737s until 2023, while the company was going to waive return conditions for the aircraft.

However, Myeni allegedly halted the deal and requested a breakdown of Macquarie’s empowerment credentials. Her move has apparently fuelled fears she wants to involve a finance house like BnP Capital in the deal.

Chairman of the Jacob Zuma Foundation Dudu Myeni - real life example of the way "entrepreneurial politicians" pull State levers of power for personal benefit.
Chairman of the Jacob Zuma Foundation Dudu Myeni – real life example of the way “entrepreneurial politicians” pull State levers of power for personal benefit.

SAA dramas could lead SA to junk status – DA

This was yet another nail in the coffin of a dying SAA, according to Lees in a statement on Sunday.

“Minister Gordhan has not been able to implement the turnaround plan that he announced in February 2016, seemingly blocked by President (Jacob) Zuma,” he said, referring to Zuma’s close friendship with Myeni.

“This plan included the restructuring of the SAA board, the possible partial privatisation of SAA and the amalgamation of SAA with SA Express.

Read also: Gordhan sparks Myeni feud SAA board needs a ‘clear out’

“Consequently, the minister has resisted the attempts by SAA to obtain further funding guarantees from the state. The stalemate seems now to be between Minister Gordhan and President Zuma – in the meantime Ms Myeni is rapidly driving SAA to total collapse,” he said.

“The SAA saga continues to have an impact on the chances of a ratings downgrade later this year,” he said.

“SAA simply cannot continue to trade under financially distressed circumstances, requiring yet another bailout from the taxpayer or facing liquidation because of the president’s personal and improper relationship with Myeni.

“If Zuma continues to impede the Minister of Finance from taking control of the national carrier it will be entirely justifiable for international ratings agencies to have little faith in Gordhan being able to manage the South African economy.” – Fin24

Source: http://www.fin24.com/Companies/Industrial/glimpse-of-saa-report-shows-carrier-bleeding-money-20160801

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