Speaking at an investor conference in New York on a televised live broadcast on Thursday, South Africa’s new Finance Minister Tito Mboweni stated his belief that South African Airways (SAA) should be closed down.
“It’s loss-making, we are unlikely to sort out the situation, so my view would be close it down,” he explained, before adding: “why I say close it down is because it’s unlikely that you are going to find any private sector equity partner who will come join this asset.”
EWN reports that SAA has not generated a profit since 2011 and is regularly cited by credit rating agencies as a drain on the government purse.
In addition, the SOE survives on state guarantees.
This is counter to President Cyril Ramaphosa’s pledge to revive struggling state firms such as SAA.
In fact, Ramaphosa transferred oversight of SAA from the finance ministry to Pravin Gordhan’s public enterprises ministry back in August – therefore decisions about the SOE are no longer up to the finance minister.
The government has allocated R5 billion in the medium-term budget policy statement (MTBPS) to help the struggling South African Airways (SAA) face a looming debt crisis in March next year.
The airline currently has R19.1 billion worth of government guarantees, of which R14.5 billion has been used and in March next year, one billion of this will be maturing.
The government says the new allocation is to help SAA repay this debt.
“In general, SAA is not generating sufficient cash to repay its total debt and will have to negotiate with lenders to refinance or extend maturity dates.”