R21 billion SAA loan may be too good to be true
The Democratic Alliance will write to the Finance Minister, Tito Mboweni, to urge him to put pressure on his cabinet colleagues to carefully consider the proposed R21 billion private loan from a consortium of local and foreign investors to SAA.
Reports today indicate that the loan is conditional on the consortium being given a 51% equity share in the national carrier.
The reported offer of the R21 billion loan looks attractive on the surface. The condition of the consortium taking a 51% equity share is particularly attractive as it would ensure that the ANC government loses all influence over SAA which would be free to conduct business without political interference that has dogged the airline in the past.
However, the offer may not be as attractive as it first appears. The following conditions must apply if the offer from the consortium of local and foreign investors is to be considered;
The proposed loans of R21 billion to SAA from the consortium must;
- not be backed by any government/taxpayer guarantees; and
- be used primarily to extinguish all existing loans to SAA that are backed by government/taxpayer guarantees.
All existing government/taxpayer guarantees of R 19.1 billion must be withdrawn from SAA and no further guarantees must be issued.
The R21 billion offer may be too good to be true and, in the end, the only solution will be to put SAA into business rescue.
SAA is bankrupt and is only able to continue trading as a result of lenders having allegedly at the eleventh hour, provided short-term funding of an additional R3.5 billion until the end of March. This will bring the SAA loans, repayable by the end of March 2019, to a massive R13 billion.
The basis on which lenders have made an additional R3.5 billion available to SAA will presumably have been on the basis of yet another “letter of commitment” from Tito Mboweni/National Treasury, that commits the government and the taxpayer, to a further cash bailout in the 2019 budget. This means that R3.5 billion has effectively been paid to SAA from the 2019 budget before parliament has approved this budget.
The use of a “letter of commitment” also avoids the use of section 16 of the Public Finance and Management Act to make such an unbudgeted payment that so embarrassed Malusi Gigaba, previous Minister of Finance, when section 16 was used on two occasions to bailout SAA foreign lenders.
The possible sleight of hand use of a “letter of commitment” by Tito Mboweni would seem at best to be underhanded but possibly illegal.
Unless robust action is taken to put SAA into business rescue or an equity partner with deep pockets is found, the massive taxpayer bailouts of SAA will continue unabated.
Statement issued by Alf Lees MP, DA Shadow Deputy Minister of Finance, 23 December 2018