BUSINESS MAVERICK

Mystery of SAA’s request for more money vexes creditors

By Ray Mahlaka 25 February 2021

Illustrative image | Finance minister Tito Mboweni. (Photo: Gallo Images / Phill Makagoe) | Adobe Stock | Flickr

The airline’s business rescue practitioners have asked Finance Minister Tito Mboweni for additional funding of R3.5-billion. But SAA creditors are apparently in the dark about this.

Some South African Airways creditors are confused about the decision by the airline’s business rescue practitioners to ask Finance Minister Tito Mboweni for more money from the national Budget.

The creditors were surprised to learn in the 2021 Budget Review that rescue practitioners Siviwe Dongwana and Les Matuson have asked Mboweni for an extra R3.5-billion to fund the restructuring of the struggling state-owned airline. 

The amount is over and above the R16.4-billion that Mboweni allocated to SAA in 2020 to fully fund its business rescue process, which is more than a year old and still going on.

The cost of this process has now risen to R19.3-billion, Treasury said in the Budget Review.

At a press briefing after his Budget speech on Wednesday, 24 February, Mboweni said: “There is no allocation in this Budget for SAA. The business rescue practitioners have made a request for R3.5-billion. That still has to be interrogated to get to the veracity of it.”

A Johannesburg-based SAA creditor said that the business rescue practitioners had blindsided creditors as they were not informed about the airline’s latest funding request: “We were in the dark; we only found out about the additional funding request from Mboweni’s Budget. This calls into question the validity of the SAA business rescue plan.” 

The original funding requirement of R16.4-billion was already included in SAA’s business rescue plan, which was voted on and approved by creditors in July 2020. The plan was later presented in Parliament, but another industry insider said the document is no longer valid because the airline’s funding requirements have changed drastically. 

In October 2020, Mboweni awarded SAA R10.5-billion in new money to pay the airline’s unsecured creditors and those who leased aircraft to the airline and to fund retrenchment packages for 2,000 workers as well as the airline’s now delayed restart. At the time, Public Enterprises Minister Pravin Gordhan said it was the last time the airline would need financial support from the fiscus. But the airline is back for more money. 

The Budget Review has implied that SAA creditors were informed about the additional funding for the airline because its business rescue plan was amended in September 2020. “The identified funding requirement [in the amended business rescue plan] was increased to R19.3-billion. Of this, R14-billion was envisaged to come from the government [including the R10.5-billion allocated in 2020/21], with the remainder sourced from strategic equity partnerships,” the Budget Review read. 

Writing in Daily Maverick on 23 February, Gordhan said his department is “nearing finality with the appointment of a strategic equity partner” that will fund SAA’s future financial requirements and beef it up with technical aviation skills. 

The SAA business rescue practitioners’ office told Business Maverick that the request for additional funding was made by the Department of Public Enterprises to the Treasury on behalf of the airline – not the business rescue practitioners. “Hence no creditor meeting [to consider the new funding] was required,” said a spokesperson for the business rescue
practitioners.

According to the rescue practitioners, a big portion of the requested R3.5-billion will go towards paying aircraft lessors (R1.7-billion), followed by R1.2-billion that will be used for the unfunded ticket liability (tickets paid for by passengers which SAA still needs to honour). The remaining R600-million will fund payments to concurrent creditors, who will receive 7.5 cents for every rand they are owed by SAA.

The rescue practitioners said these amounts are not new because they have already been committed in the business rescue plan, which has already been approved by creditors. “However, the Department of Public Enterprises did not submit this amounts to the Treasury in the Medium Term Budget or R10.5-billion because they are payable only from August
2021 over three instalments.”

The delays in the completion of SAA’s rescue process mean the airline failed to return to the skies in January 2021 – as proposed by the approved business rescue plan. SAA is being left behind in the aviation industry as most airlines have resumed flights under less-strict lockdown regulations. DM/BM

  • Comment added from the Business Rescue Practitioners
Gallery

Comments - share your knowledge and experience

Please note you must be a Maverick Insider to comment. Sign up here or sign in if you are already an Insider.

Everybody has an opinion but not everyone has the knowledge and the experience to contribute meaningfully to a discussion. That’s what we want from our members. Help us learn with your expertise and insights on articles that we publish. We encourage different, respectful viewpoints to further our understanding of the world. View our comments policy here.

All Comments 15

  • Surely it is past time for this financial sink to be disposed of to the private sector and removed from the league of supported SOEs?
    In the hands of qualified professionals, without political interference, it would quickly revert to a profitable entity and would become a flagship proving the beneficial effect of the PPP system currently being exploited by our Socialist regime?
    The Rescue Brokers must be making a fortune out of extending both their borrowing arm and the rescue process, the pilots and staff surely are not!

  • This is sick! Shut the damn thing down and be done with it. Business rescue simply means pouring more money down the drain. The cost of the rescue equates to the losses of keeping it flying!!!

  • A slap in the face for all South Africans , especially the poor who will never fly on this heavily subsidised SOE. Sell the name and be done with it.

  • I am quite sure its for fees – you know, all those useful types: the consultants, the lawyers, the accountants and of course the BRP’s themselves struggling to get through the year on a few hundred million. Smokescreens and jargon masking just continued plunder by a small cabal of connected insiders. Maybe they might even pay the pilots (choke). The expertise to run that airline profitably exists in this country, but naturally it cannot be used until the barrel is drained to the dregs. Then of course there’ll have to be an enquiry, which will cost…?

      • Pravin was given a whole opinionista column in this esteemed DM publication just last week. No mention was made of this extra money for this incredibly sick puppy. Pravin has gone from tax restructure hero to State Obsessed Enterprise zero.

  • It was reported a few weeks ago that the BRP fees are in excess of R100m. I suspect a few connected families are now funded for the next four generations…

  • Up to now all we have seen is an expensive publicity stunt picking up one backy load of vaccine. And the half literate overpaid SAA official, either stupid or thinking everybody else is, waffling about the health of the nation and how this proves how necessary SAA is. As though there are no other planes!

  • Gee , where can I join the tender line to be a ‘Rescue Broker’ ?

    “The original funding requirement of R16.4-billion was already included in SAA’s business rescue plan, which was voted on and approved by creditors in July 2020.
    Lower down I see !
    “In October 2020, Mboweni awarded SAA R10.5-billion in new money to pay the airline’s unsecured creditors and those who leased aircraft to the airline and to fund retrenchment packages for 2,000 workers as well as the airline’s now delayed restart. ”
    So 3 months into the rescue , more money . At least we ‘know’ where that went 🙂
    So what happened to the original cash ?
    Then we have ,
    “The identified funding requirement [in the amended business rescue plan] was increased to R19.3-billion. Of this, R14-billion was envisaged to come from the government [including the R10.5-billion allocated in 2020/21],.
    What am I missing ? Original funding was R16.4b ?
    Yet later I read that of that R10.5 was only approved in October ? That was to pay all the real things !
    Or it is a ‘top’ up’ ?
    Moving on , what has R9billion being spent on exactly ?
    Advising ?
    On how we can roll around in loads of cash ?
    Who are the rescue guys ? Do they have street cred ? Who are they ? How did they get the job ?
    We can rescue SAA , will charge you R5.9 billion and you pick up the tab for the real stuff !
    Another R10 billion .
    We have our money ………or do they ?
    Whatever , only the cabinet and the anc want SAA , get their free flights , plain and simple !
    On the bright side , some things are changing .
    The masses are not stupid , despite the efforts of the Dept of Edukashun , all the failed promises build up !
    Where to turn to to have my voice heard ?
    EFF , want me to rent from them . DA , seen as too white ? Have a lot going for them . And vote for the fringe parties too.
    Voter turnout is shocking , what was it in 94 ?
    Was my only vote in 49 years here .
    Until the 50-60 % of apathetic voters make a X , more of the same and only themselves to blame , that culture is growing . Will take years .
    At best , 10 , for regime change , cannot undo the past ! Country has had its legs and arms broken for nearly 40 years by then !
    SAA , is over , we are not a hub , just a small regional airline , vastly overpriced when I looked in 2017 , flew Thai and saved 50% , no joke !

  • Perhaps if we could see some graphics of what these amounts of money look like. I personally can’t visualise it, millions, billions, trillions roll off our tongues… represented visually in cattle or truck loads… I am sure would be a huge wake up for most South Africans.

  • Business Maverick

    Mango Airlines set to be grounded as it fails to pay creditors 

    By Ray Mahlaka