South African Airways (SAA) is one of a number of State-owned enterprises (SOEs) adding to spending pressures on government, Finance Minister Tito Mboweni reiterated on Wednesday.
He pointed out that the airline was insolvent and, in its current configuration, unlikely to ever generate sufficient cash flow to sustain its operations.
Funding for SAA, the South African Broadcasting Corporation, Denel and South African Express (SA Express) amounted to R10.8-billion in the current year, almost the entire contingency reserve for 2019/20.
Government will repay SAA’s outstanding government guaranteed debt of R9.2-billion over the next three years, to honour operational contraction obligations, with SAA unable to repay this. However, Mboweni emphasised that operational changes at the carrier were “required urgently”.
To put the problem in context, over the past 13 years, SAA has incurred over R28-billion in cumulative losses.
Government had transferred R5.5-billion to SAA in the current year to enable the carrier to extend maturities on outstanding debt obligations, giving it time to develop an affordable repayment plan with creditors.
However, without a debt repayment plan supported by government, the airline’s lenders are unlikely to extend outstanding government guaranteed debt of R9.2-billion beyond the end of the fiscal year, or to provide additional facilities needed for SAA to remain liquid.
If this happens, government is contractually required to step in and repay this debt.
The Department of Public Enterprises had set out to sign shareholder compacts with the seven SOEs that fall under its mandate, as well as to review the corporate plans of those SOEs, during the first half of the current financial year.
However, this was not achieved, owing to ongoing concerns at Denel, Eskom, SAA and SA Express.
Following the recapitalisation of these companies, compacts have been prepared for sign-off and are expected to be finalised in the second half of the current financial year.
Mboweni, did, however, note some positives in conversations involving SAA and potential equity partners, which would liberate the fiscus from the beleaguered enterprise.
Mboweni further informed that Cabinet had considered several options to resolve the impasse over the electronic tolling of the first phase of the Gauteng Freeway Improvement Project.
Government has decided to retain the user-pays principle.
“While there will be a further dispensation and value-added services, compliance will also be strengthened,” Mboweni stressed.
He called on citizens to pay their e-tolls, saying government was unable to sustain the road network without the additional funding from tolls.
The South African National Roads Agency Limited (Sanral) has incurred yearly losses of about R1-billion, on average, since 2014/15.
The agency is not generating sufficient cash from its toll portfolio to settle operational costs and debt redemptions falling due over the next three years.
Government has extended a total guarantee facility of R38.9-billion to the agency, of which R30.3-billion had been used by March 31.
Over the medium-term, Sanral is expected to repay R10.7-billion of maturing debt obligations and R10.8-billion worth of interest payments.
To enable Sanral to pay these obligations, government will implement direct user charges as outlined in the National Transport Policy White Paper.