Transport Minister Barbara Creecy on Tuesday said the South African Airways (SAA) was seeking a loan facility from financial institutions.
This comes as securing a strategic equity partner to restructure the national airline is still on the cards.
Speaking before the standing committee on public accounts (Scopa), Creecy said SAA was debt-free and was not looking for additional funding from the National Treasury.
“The airline is in discussion with financial institutions regarding a loan facility should any difficulties arise,” she said.
“Government remains open to securing an equity partner for SAA. This would assist in ensuring the ability of the airline to continue as a going concern and help to facilitate the expansion of regional and international routes,” Creecy said.
SAA interim board chairperson Derek Hanekom said it would seriously assist in the longer term if there was some form of capital injection for the SAA.
“That form of capital injection, as the Minister said, could be by another way of another investor, equity share partner, but we don’t depend on it,” Hanekom said.
He said if something transpired on an equity partner, it would be welcome and useful.
“It would mean that we would be able to push forward some of the plans that have been pushed back because of non-availability of R3 billion. We postponed the plans in our previous corporate plan because funds were not available,” he said referring to the money that was promised in the cancelled deal with Takatso Consortium.
He confirmed that the SAA was engaging banks not to get a loan at this point but a loan facility as a kind of buffer.
“The cash reserves are low and make us quite vulnerable should there be any shocks. We don’t have anything to draw in. It is really to be there as a buffer,” Hanekom said.
Creecy said SAA has repositioned itself as a leading national carrier taking advantage of its ability to provide long-haul and intercontinental flights services and leveraging its partnerships with other airlines after exiting business rescue in 2021.
However, the state-owned enterprises (SOE) is still saddled with finalizing legacy annual financial statements for the years 2018-2019 to 2021-2022 in order to improve audit outcomes.
Creecy said this has resulted in a delay in finalising the 2023/2024 financial statements.
“The audit of the 2022-2023 financial statements is now effectively complete with administration processes being finalised. The audit of the 2023-2024 financial statements has started and is progressing according to plan,” she said, adding that the auditing was expected to be finalised by February 2025.
Despite the outstanding financials still to be produced, SAA approached the banks because of changes that took place and has stabilised.
Hanekom said the banks were looking at their business plan.
“We have in the region of R5 billion worth of unencumbered property. That will stand us in good stead for the possibility of getting this loan facility,” he said.
But, parliamentarians were not impressed with the government’s option to secure a strategic equity partner for SAA.
ANC MP Ntando Maduna said there was a tendency when an SOE was not doing well, that the private sector was invited.
“We believe these are state legacies that must be protected and 100% owned by the state,” Maduna said.
MK Party’s Kwenzokuhle Madlala said privatization was one of the things his party would never support whether it was called finding an equity partner or unbundling.
“It gets that terminology when these entities must fall in hands of capital to maximize profit,” Madlala said.
DA MP Farhat Essack questioned how in light of the outstanding financial statement SAA proposed to raise funding in the market.
“Banks want to see the liquidity and true value of nett assets in terms of equity. If financial statements are not coming, how will the market assess equity within the SAA”? Essack enquired.
Crecy said she understood the concern in terms of wanting to see financial statements so that they have proof that SAA was not in debt.
She stated that the airline needed a capital injection to get to its former glory.
“What we say we need is an equity injection. If development finance institutions want to take equity, that would be a good solution. We have that solution in Airport Company of South Africa where the Public Investment Corporation owns equity. Let us see when the time comes whether the prospects are appetising for development finance institutions,” she said.
Cape Times