A new bailout for SAA

Eleanor Steed
By Eleanor Steed August 24, 2017 09:24

A new bailout for SAA

The South African government is reported to be considering bailing out South Africa Airways (SAA) to the tune of R10 billion, approximately $757 million, with the sale of its 39% stake in telecommunication provider, Telkom. Treasury spokesman Mayihlome Tshwete told reporters that this was one option under consideration and stated that nothing had been finalised. Minister of Finance Malusi Gigaba plans to disclose the final financing option for SAA at the medium-term budget statement in October.

Despite continuing losses, the government is determined to save SAA seemingly at any cost, since credit rating agencies have warned that a R10 billion bailout would be significant enough to impact South Africa’s sovereign credit rating. S&P Global Ratings and Fitch have already downgraded South Africa’s credit to junk.

The proposed bailout only came to light during an impromptu question from Democratic Alliance MP Alf Lees to Deputy President Cyril Ramaphosa who quoted from a leaked supposedly secret memo detailing the bailout to be paid during the current 2017/18 fiscal year, according to various press reports. The memo said that the bailout would be attached to certain conditions. Lees questions the logic behind selling a “good” asset – Telkom – to save a bad one (SAA).

SAA already received a R2.2 billion government guarantee on June 30, 2017 even though the investigation regarding financial mismanagement at the airline company is ongoing. This saga will continue to run but without deep and serious change, SAA will only continue to go cap-in-hand to the government to prop up its flawed business.

Meanwhile, SAA suffered another setback over the weekend as one of its flights to Zimbabwe was denied entry to the country due to documentation issues. Flights resumed this week but stranded passengers needed to be compensation and the airline is now costing the cost of grounding its aircraft.

Eleanor Steed
By Eleanor Steed August 24, 2017 09:24