SAA’s failure to settle its debt would have resulted in default – Ramaphosa
Deputy President Cyril Ramaphosa said the South African Airways (SAA) bailout was a crucial decision made by government because failure to settle debts would have resulted in SAA defaulting on its debts.
Ramaphosa was answering questions in the National Council of Provinces.
SAA holds a R19.1-billion government guarantee facility to allow it to remain in operation, and received R3-billion from the National Revenue Fund at the beginning of October to allow it to repay its debt to Citibank. Earlier in the year, it was given R2.2-billion to meet its debt payments to Standard Chartered Bank.
Ramaphosa said that it became clear that SAA was unable to settle its debt, and government took measures to intervene in order to recapitalise the state owned enterprise.
He said government believed that, with the reconstituted board and a newly appointed permanent CEO, SAA is on the road to financial sustainability.
“However, for that to happen, the shortfall in the capital structure and over-reliance on debt has had to be dealt with. Now these are challenges that this state owned enterprise has had to face, and as it is a state owned enterprise, it has had to be born by our government and challenges have had to be addressed,” he said.
Ramaphosa said the remedial actions had to be taken and a clear plan to revitalise SAA was in place, adding that the new board and CEO should be given an opportunity to execute the plan which will be closely monitored by government as a shareholder to make sure that SAA does indeed get out of the challenges that it is currently facing.
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