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SAA bankrupt and not a going concern - Alf Lees

DA MP also says Tito Mboweni’s budget must not include any further bailouts for airline

Mboweni’s budget must not include any further bailouts for SAA

The settlement agreed to by South African Airways (SAA) with Comair for SAA to pay Comair R 1,2 billion in damages plus legal costs has added to the cash crisis at the national carrier.

What this settlement agreement of R 1,2 billion plus legal costs means is that it adds at least another R 1,2 billion to the taxpayer bailouts required to keep the bankrupt SAA in business.

In order to be able to continue trading and flying its aircraft until the end of March 2019, SAA has recently had to borrow another R 3,5 billion on top of the R 14,0 billion that SAA already owes and of which it is understood that some R 9,0 billion plus the recently borrowed R 3,5 billion, amounting to R 12,5 billion, are repayable by the end of March 2019. These massive borrowings remain an Albatross around the necks of taxpayers despite taxpayer cash bailouts of R 15,0 billion paid to SAA over the past two years.

The SAA corporate plan reflects continued losses of R 7,1 billion for the 2018/19 and 2019/20 years. The DA view is that these projected losses are optimistically low and that unless these losses are funded by further taxpayer bailouts the airline will be forced into liquidation.

In the first place there is no logical reason for SAA to be in business at all. The national carrier is still clearly cursed by maladministration and corruption, is over-staffed and bankrupt. In the second place South Africa, and thus South African taxpayers, is facing a massive cash crunch largely because of the failing ANC created ESKOM crisis but also because of the ANC created crises throughout the government.

Finally, there are private airlines that have no drain on taxpayers’ funds that are ready and able to immediately fill any gaps that may arise if SAA were to be shut down.

South Africa is itself so heavily in debt that it simply does not have the money to continue bailouts of SOE’s such as South African Airways.

In order to at least save some of the jobs at South African Airways as well as to minimize the taxpayer bailouts, and as Finance Minister Tito Mboweni considers allocations of precious funds in the 2019 budget, the Democratic Alliance urges him to make the hard decision to place South African Airways under business rescue. Sadly with business rescue taxpayers will likely have no option but to meet the government guarantee obligations very foolishly made by the ANC government on behalf of SAA.

Statement issued by Alf Lees MP, DA Shadow Deputy Minister of Finance, 16 February 2019

Update:

SAA bankrupt and not a going concern

The Democratic Alliance will write to Thembekile Kimi Kakwetu, the Auditor General of South Africa(AG), to request clarity on the reasons why the audit of the South African Airways (SAA) annual financial statements has not been completed timeously to allow SAA to submit its 2018 annual financial statements to Parliament by the 30th of September 2019, as is required by the Public Finance and Management Act (PFMA). SAA is clearly yet again in breach of the PFMA.

Like in prior years when the infamous Ms. Dudu Myeni ruled like a corporate warlord at South African Airways, SAA has once more flouted the law by not submitting its 2018 annual financial statements by the 30th of September 2018.

Some four and a half months after the due date for SAA to submit its 2018 annual financial statements to parliament, Pravin Gordhan, on the 13th of February 2019, apparently informed the Parliamentary Portfolio Committee on Public Enterprises that the audit of SAA financials for 2018 was “far from complete”.

It is highly probable that, like in prior years, South African Airways is not a going concern and that the Auditor General would be forced to qualify his audit opinion if he were to finalise his SAA audit report. If the only reason that the AG has not completed the audit of the 2018 finances of SAA is because SAA is not a going concern, then the AG himself must be asked to account for being a party to SAA being in breach of the PFMA requirement for annual financial statements to be submitted to Parliament by the 30th of September each year.

If South African Airways cannot be assumed to be a going concern, then the Directors should, in terms of section 22 of the Companies Act, be held liable for SAA to be trading recklessly.

There is only one course of action for South African Airways and to try to save most of the jobs, and that is to put SAA into business rescue.

Statement issued by Alf Lees MP, DA Shadow Deputy Minister of Finance, 17 February 2019