Public Enterprises on the restructuring process at South African Airways

In December, the government announced its plans to introduce a radical restructuring process at South African Airways SOC Limited (SAA). This was to ensure its financial and operational sustainability and in so doing reduce its ongoing impact on the fiscus. An orderly and methodical restructuring process at SAA was one of the government’s top priorities as it introduced the restructuring. In the first week of December, the SAA Board adopted a resolution to place the company into business rescue. This was supported by the government as an optimal mechanism to restore confidence in SAA and to safeguard its good assets.

The Business Rescue Process process allowed SAA to continue operating in an orderly and safe manner and to keep planes and passengers flying under the direction of a business rescue practitioner. SAA lenders provided R2 billion as post commencement finance (PCF) to enable SAA to continue to operate, while the Government, though National Treasury, committed an equal amount. The Government continues to work with the Business Rescue Practitioners, with the primary goal of bringing out of this process a restructured, modern airline that is able to bring million more tourists and be a beacon of both business innovation and efficiency.

We would like the airline to create more jobs in tourism and related sectors of the economy and work with other African airlines to underpin and service the integration of African markets and improve dramatically intra-African trade and travel. We are determined to break with the past patterns of bailouts as these have become a moral hazard. The Business Rescue process is unprecedented at this level and fashion, and in the public sector. It is a decisive move that demonstrates that government will undertake the necessary bold steps in order to reposition its assets in such a way that they do not continue to depend on the Fiscus and thereby burden taxpayers.

Following a meeting with the Practitioners at the weekend, the Department of Public Enterprises is engaging with the National Treasury to raise funds for the airline in line with the PCF undertaking. We are determined to contribute to the Business Rescue process so that we could minimise job losses and give birth to a rejuvenated SAA that all South Africans could be proud of. Collective effort is needed to make SAA as a premier African airline and Star Alliance member. The creation of a sustainable, competitive and efficient airline with a strategic equity partner remains the objective of government through this exercise.

We thank the South African Public, customers, investors and suppliers of SAA for their understanding and patience during this difficult time.

Source: Government of South Africa