Cape Town – South Africans who argue bailing out cash-strapped national carrier South African Airways (SAA) amounts to throwing good money after bad don’t realise what they’re talking about, Deputy President Cyril Ramaphosa said on Wednesday.
Responding to questions in the National Council of Provinces, Ramaphosa said that had government folded its arms and done nothing when SAA ran the risk of defaulting on its debt, the consequences would have been catastrophic for the entire economy.
“South Africa Inc. would have been at great risk. Government is the guarantor of last resort. Had we done nothing, we would have been required to pay up in one go. An SAA default on debt would have run across all other guarantees to state-owned enterprises such as those to Transnet and Eskom,” he said.
This in turn would have had an impact on government bonds and South Africa’s sovereign credit rating, Ramaphosa said. “We need to take this (bailout) on the cheek and hope the new board and CEO (of SAA) can turn the national carrier around.”
SAA has received two emergency bailouts in 2017 to prevent it from defaulting on its debt.
Standard Chartered insisted that a R2.2bn loan be settled in full at the end of June, while Citibank demanded the repayment of its R1.8bn loan on September 29.
In both instances, Finance Minister Malusi Gigaba invoked section 16 of the Public Finance Management Act (PFMA) to grant the cash-strapped carrier a lifeline.
Ramaphosa said that, in addition to the R1.8bn already paid out to Citibank, another R5bn in loans is owed to other lenders who have agreed to extend these on condition that SAA receive a capital injection of R3bn.
“Therefore the Finance Minister allocated a R10bn equity injection to SAA in his medium term budget policy statement, which includes the R2.2bn provided in June this year and R3bn in September this year,” he said.
Government believes that the reconstituted SAA board and its new CEO will put the national airline on a path to financial sustainability, the Deputy President added.
Vuyani Jarana, formerly chief officer at Vodacom Business, started as new CEO of SAA on Wednesday.
SAA's new board, meanwhile, was announced on October 19 after Cabinet had approved the appointment of six new board members, including a new chairperson to replace embattled Dudu Myeni.
Myeni was replaced by businessman Johannes Bhekumuzi "JB" Magwaza as chairperson.
Nolitha Fakude was named the new deputy chairperson and non-executive director, replacing Tryphosa Ramano.
“There are challenges that SAA has had to face. But the pleasing thing is that remedial actions are now underway,” Ramaphosa said.
He appealed to members of the NCOP, in particular the DA, to give SAA's new management an opportunity to execute their plan of action.
“Let’s not beat SAA to the ground. They’re South Africans who have been given a very difficult task. As they set off rather than tear them down, say to them ‘We wish you the very best.’
“We can’t just throw SAA away. It’s a prized asset with a far reach globally and domestically,” Ramaphosa said.
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