SAA warned to file financials, overhaul board

(iStock)
(iStock)

Cape Town - The much-delayed tabling of South African Airways' (SAA's) annual financial statements has now dragged on for an unacceptably long time and all concerned must urgently get the matter resolved, Parliament's Standing Committee on Finance said on Wednesday.

It expressed concern about reports that SAA could be deregistered in Hong Kong if its financials are not finalised by September 6, and noted with concern the implications of an SAA advert seeking to raise R16bn in the market.

The committee asked Treasury to ensure that SAA’s 2014/15 annual report and annual financial statements are tabled in Parliament by the September 15 deadline. It also urged the appointment of a new board, and for management to be strengthened considerably as soon as possible.

Treasury - which is SAA's shareholder representative - told Fin24 on Wednesday that the airline's financial position requires extensive and careful consideration, because of the potential implication for the South African as well as for country's sovereign standing.

"In order for a company to finalise its AFS (annual financial statements) on a going concern basis, the company is required to demonstrate that it is solvent and will be able to meet its obligations as they fall due over, at least for the next 12 month period," National Treasury told Fin24.

It pointed out that the additional government guarantees required for SAA to demonstrate that it does indeed meet these requirements would have to be reflected in the notes to the airline's financials.

Finance Minister Pravin Gordhan indicated last week that a “good announcement” regarding SAA could be expected “shortly”.

READ: SAA rejects allegations of business rescue, liquidation

Cash-strapped SAA published a funding request over the weekend, hoping to raise R16bn from banking and non-banking financial institutions to meet its working and capital expenditure requirement, as well as consolidate its current debt portfolio.

Despite this step, SAA still rejects allegations that it should be placed under business rescue or even liquidation. SAA spokesperson Tlali Tlali pointed out that a going concern government guarantee is needed to finalise the annual financial statements and that there are extensive, ongoing engagements with Treasury to try to find a solution and provide certainty.

Business rescue an 'absurd misdiagnosis'

Tlali emphasised earlier this week that SAA has neither defaulted nor been unable to meet its obligations to service its debts – a key determining factor to justify placing a company under business rescue. In his view, those advocating for business rescue are making an absurd misdiagnosis.

In July Gordhan was forced to request Parliament to grant an extension of tabling the much-overdue annual financial statements until September 15. SAA submitted an updated application for a going concern guarantee on December 21 2015. Its financials cannot be finalised on a going concern basis until a decision has been taken on the guarantee application.

In November last year, SAA also asked for further help from government to the tune of R5bn to enable it to complete its annual financial statements for 2014/15. This was in addition to a Treasury grant of R6.5bn in December 2014. Government has given SAA a total of about R14.4bn in guarantees to date.

The Standing Committee on Finance on Wednesday once again expressed concern about the state SAA finds itself in and called on Treasury, the Presidency and the national carrier to cooperate effectively to stabilise the airline.

The committee warned that it would go against SA's national interest if the airline's financial situation is not stabilised.

Committee chair Yunus Carrim said the structural constraints SAA confronts in the aviation industry need to be addressed, and a consensual as well as effective turnaround strategy forged and rigorously implemented.

ALSO READ: BEE clause in SAA funding notice raises red flag

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