South African Airways plane. Picture: Supplied.
The 2017 Medium Term Budget Policy Statement (MTBPS) tabled on Wednesday states that government has issued a R19.1 billion guarantee facility to the airline to ensure it continues to operate as a going concern.
The road thus far
“Total recapitalisation of R10 billion will be provided in 2017/18. An amount of R5.2 billion has already been provided, with the remaining R4.8 billion to be transferred by 31 March 2018.”
The funds will be used for working capital and to settle debt, enabling the airline to reduce its interest expenses.
Despite the capital allocation, government’s exposure to SAA debt remains significant at R15 billion.
“There is risk that if SAA’s financial fortunes do not improve, there will be further calls on the remaining guarantee,” noted the MTBPS.
SAA’s financial woes
SAA, which was moved from the portfolio of Public Enterprises to National Treasury in 2014, has been struggling to pay its lenders and service providers.
At the end of September, National Treasury announced that government had approved a R3 billion transfer from the National Revenue Fund (NRF) to SAA to meet its debt obligations to Citibank.
September’s transfer followed on another made in July.
Last week, Treasury announced the appointment of six new members to SAA’s board.
The MTBPS noted that the appointment of a new Chief Executive Officer – who will commence his duties on 1 November — is a critical step in ensuring that the airline’s turnaround strategy is aggressively implemented.
