Soweto - The bailout of South African Airways (SAA) is fiscally neutral, with no effect on the fiscal framework, according to Finance Minister Malusi Gigaba.
He was speaking at the launch of the 2017 tax season on Monday. Gigaba responded to a question about where the funding for the R2.2bn would come from.
Over the weekend Treasury announced SAA received the bailout to help avoid a default of its loan from Standard Chartered Bank, Fin24 reported.
Gigaba advised that Standard Chartered's decision to pull out was due to a “loss in the faith of SAA’s financial position” and not in the country. Other lenders remain committed to the airline, he affirmed.
On Friday director general Dondo Mogagane spoke with each of the remaining lenders, who will continue to support the airline, said Gigaba.
“We would have wished Standard Chartered would have changed, but there is nothing we could do if they wanted to leave,” he said. Standard Chartered has other investments in the South African economy.
Gigaba explained that the loan was made under section 16 of the Public Finance Management Act, which empowers the minister to take action and use money for an emergency, within a stipulated framework. The money has to be accounted for in Parliament.
“We have used money available in a fiscally neutral way we have. It did not affect fiscal framework in any way.”
An extensive report will be provided at the mini budget, he said, at which further details of the recapitalisation programme for the airline will also be announced.
The conditions include SAA finalising the appointment of a competent CEO, which it has done, said Gigaba.
“SAA had over the years bled skills in a very serious way. There is a lot of work the new CEO must embark on to rebuild the skills base of the airline.”
There should also be a strict implementation of the turnaround strategy. Gigaba is writing a letter to the airline about the turnaround strategy. “There are strict conditions I am setting for the airline in this regard,” he said.
The airline faces a number of challenges, such as the appointment of an aviation specialist, the jet fuel strategy which is costing SAA and addressing the route network strategy, explained Gigaba.
“Urgent decisions need to be taken at SAA,” said Gigaba. “We need to resolve the SAA dilemma. It has gone on for far too long. I want the SAA issues to be resolved.”
He added that governance at all state-owned enterprises should be addressed and they should be financially strengthened.Read Fin24's top stories trending on Twitter: Fin24’s top stories