8 November 2017

South Africa: R13 Billion Has Been Wasted On an Airline That We Do Not Need

press release

The following speech was delivered by the DA Shadow Deputy Minister of Finance, Alf Lees MP, during the debate on the 2017 Revised Fiscal Framework in the National Assembly today.

Madam Speaker,

The Revised 2017 Fiscal Framework indicates that the Expenditure Ceiling is going to be exceeded by R3.9 billion. This breach was completely avoidable had remedial action been taken to stop political interference and had competent people been appointed to the board at SAA.

As far back as September 2016, when South African Airways (SAA) should have been placed in business rescue, the ANC chose to give it a R4.8 billion guarantee lifeline.

In order to prevent Standard Chartered Bank from calling in the government guarantee at the end of June 2017, the Minister of Finance invoked section 16 of the Public Finance Management Act (PFMA) to make an emergency payment of R2.2 billion to SAA.

For the 2017/18 financial year to July of this year, SAA ran at massive losses of R293.8 million per month and had no prospect of paying the loans of R6.8 billion due at the end of September 2017.

Domestic lenders were persuaded to roll over their loans on condition that certain conditions such as the removal of Dudu Myeni from the SAA board were met.

Citibank refused to roll over their loan and demanded payment.

In order to enable SAA to pay Citibank R1.8 billion, pay arrear suppliers of nearly R1.0 billion and to have some working capital available, the Minister of Finance once again invoked section 16 of the PFMA and made a R3.0 billion payment to SAA.

This brought the direct cash bailouts to SAA in 2017 to R5.2 billion.

A further R4.8 billion is now budgeted for SAA to fund ongoing losses.

Once this appropriation is approved it will bring the total cash bailouts to SAA in the current year to R10.0 billion.

It is these R10.0 billion of bailouts to SAA that have caused the Expenditure Ceiling to be breached.

Unfortunately, despite the appointment of a CEO and the board restructuring, the losses will continue with the Minister of Finance budgeting, rather optimistically, for a further R3.0 billion bailout to SAA in the 2018/19 year.

The R13.0 billion rand could have provided:

- 100 000 Reconstruction and Development Programme houses; and

- 162 000 National Student Financial Aid Scheme bursaries.

Instead, the money has been wasted on an airline we don't need.

Alf Lees MP

DA Shadow Deputy Minister of Finance

South Africa

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