The easy, if unpalatable bit is the out of kilter SAA balance sheet. SAA Group, including technical and other subsidiaries like catering, recorded R5.42-billion losses in the financial year ending 31 March 2018. The national carrier is not a going concern, effectively it is insolvent as its liabilities exceed assets by some R13-billion, and it is kept in the air on the back of bailouts at taxpayers’ expense.

That’s according to documents the national airline submitted to Parliament’s public spending watchdog, the Standing Committee on Public Accounts (Scopa). And from these documents it emerges that SAA, which accounted for R5.01-billion of the losses, spent R630-million on “data costs” and R1.497-billion on “accommodation and refreshments”, or effectively just under half of the R3.14-billion spent on leasing aircraft.

Co-incidentally, the document also notes breaches of the Public Finance Management Act (PFMA), particularly in procurement, with “a plan of action has been put in place by the Group to mitigate the recurrence of PFMA contraventions… Additional discussions are being held with National Treasury in order to put measures in place mitigating non-compliance”.

To put this financial hot mess into perspective: the R5.5-billion bailout the national airline received in September 2019 offset the losses of the 2017/18 financial year. That’s it.

Hence the scrambling for at least R2-billion more in loans needed in December, which potential lenders, however, want government to underwrite. But government is opposed to State-owned Entities (SOEs) bailouts and state backed guarantees, with Finance Minister Tito Mboweni, the blunt but tactical battle axe.

Commentary on the potential sale or closing down of SAA or finding a strategic equity partner – the ideologically more palatable term to privatisation – has been Mboweni’s mantra pretty much from word get go after being sworn in as finance minister in October 2018.

It’s part of Mboweni’s strategic role in Cabinet: he can talk bluntly about what it takes to redirect and kick start South Africa’s stalling economy stuck at an anticipated 0.7% growth rate, and stubbornly high unemployment. And then back such talk up with a national discussion paper as National Treasury did in late August 2019 despite the largely predictable criticism of being neo-liberal, the swear word of the left.

The October Medium-Term Budget Policy Statement (MTBPS) pledged to repay over the next three years SAA’s R9.2-billion historical debt, but Mboweni again emphasised:

“SAA is unlikely to every generate enough cash flow to sustain operations in its current configuration… Operational and governance interventions are required urgently! I am pleased to learn that there are conversations involving SAA and potential equity partners, which would liberate the fiscus from this SAA sword of Damocles.”

And further SAA bailouts were tantamount to choosing “to subsidise the middle class and wealthy flying around the country and other parts of the world, rather than the ordinary workers who sit in old trains from the townships every day, often getting stuck and being late for work…”

Within the political and ideological jockeying in the finely balanced factions of the post 2017 Nasrec ANC, these comments seemed to have made an impact. Subsequently, and significantly,

ANC alliance partners Cosatu and the South African Communist Party (SACP) moderated their previously very firm no to equity partners to SOEs, at least when it comes to SAA.

On Tuesday the shift in attitude towards perhaps not maintaining SAA as a wholly state-owned were reiterated by Public Enterprises Committee Chairperson Khaya Magaxa, a SACP Central Committee member who’s also an ANC MP.

“SAA must allow a strategic equity partner to participate,” he told Daily Maverick. “Cabinet will be meeting (on Tuesday) on the radical transformation, the radical restructuring of SAA. We are looking forward to an announcement.”

Public Enterprise Minister Pravin Gordhan, who may for all intents and purposes may well agree with Mboweni, must tread much, much more circumspectly. After all, Gordhan the minister has to be seen to protect that which is in his portfolio, from jobs to transformation and sometimes just plain nostalgia like keeping what many see as a vanity project in the sky.

And so on Sunday, 1 December 2019 a Public Enterprises statement put it thus:

“The airline group will now go through a radical restructuring process which will ensure its financial and operational sustainability. There is no other way forward. The government is committed to a viable, sustainable, profitable national airline. In pursuance of this, various options are being explored.”

Some of those options would have been discussed between Gordhan and Mboweni before that statement was issued. And those options, including its preferred one, would be before Tuesday’s Cabinet meeting.

While nothing is certain, SAA has itself done some scenario planning and it’s likely that this would form part of the options for Cabinet consideration. Some details emerged in the documents submitted to Scopa, specifically the long-term turnaround strategy (LTTS) review dated 21 August 2019.

It’s a curious document that includes proposals like updating the SAA fleet and getting rid of its A340-600 aircraft, and then leasing four aircraft for between three to four years at a cost of US$18, or R261-million. SAA would raise R3.5-million from the sale for dismantlement/disposal.

This is part of the long-term accelerated fleet plan, part of the preferred option approved by the SAA board, but not yet approved by government.

Dismissed was a scenario that would see SAA ditch all international flights to focus on domestic and regional routes by April 2020.

And also dismissed was, what the LTTS review describes, as “drastic restructuring”. This would, for example, include an end to many routes, including Hong Kong and Perth, to focus on European and North American markets, while also cutting down staff down to a ratio of 16 flight deck staff and 60 cabin crew per aircraft.

But this, it emerges from the documents submitted to Scopa, like turning SAA into a domestic and regional airline, was rejected by SAA, as was liquidation.

At a meeting with Scopa in mid-November 2019, SAA board director Martin Kingston told Scopa in mid-November, this LTTS review dismisses outright the possibility of SAA going into liquidation.

The LTTS review outlines how between R35-billion to R48-billion due for immediate settlement if the national carrier was liquidated. The breakdown is as follows: R9.2-billion in historic debt, R14.5-billion of “other liabilities” and aircraft leasing costs that would become due ranging between R11.6-billion to R12.8-billion.

“Treasury liable to settle R15.3-billion bank debts and creditor guarantees due to government backed guarantees.”

It’s money South Africa’s tattered public purse simply does not have. And this is how SAA has government by the short and curlies.

And that grip is tightened when SAA in its “Roadmap to finalise annual financial statements” document argues it can’t complete the financial statements until going concern status is confirmed, which can only happen when government either hands over more bailout billions or underwrites guarantees or both.

To date that’s not happened. Tuesday’s Cabinet discussions are a key moment.

For Scopa the information is the first available step towards accountability given SAA has not published annual financial statements and annual reports now for two consecutive years.

And the information that’s now become available underscored the problem, according to DA MP Alf Lees. The financial statements were “absolutely shocking”, he told Daily Maverick: “The SAA board have withheld the correct financial statements and basically have hidden the true state of SAA.”

The previous Scopa SAA meeting failed to take off at the end of November, but Scopa MPs will have another take on Thursday when another meeting in Gauteng is scheduled.

For Cabinet, Tuesday is a crucial moment to try settle the SAA turmoil. How it all shakes out, remains to be seen. DM