Aside from mounting a financial rescue operation at Eskom, the government will give another R1 billion to SAA before the end of the current financial year towards paying off the airline’s historical debt.
The allocation flows from the settlement agreement reached between SAA’s business rescue practitioners and its creditors for the phased repayment of the debt.
“Consequently, an additional R1 billion will be allocated during 2022-23 to assist with these outstanding obligations, with additional funding to be considered subject to strict conditions to allow the strategic equity partnership to be finalised,” the treasury said in the 2023 budget overview.
Following the fraught sale of the airline to the Takatso consortium, SAA resumed domestic and regional flights in 2021. But it remains far from sound health and failed to submit financial statements for last year.
A senior treasury official said the carrier’s remaining debt stands at some R2.5 billion owed to “odds and ends creditors” and includes ticket refunds.
In the current financial year, the treasury could find R1 billion but negotiations with the new owners and business rescue team would follow on covering the remainder and the conditions that would apply to further help.
“As a condition of such funding, all government guarantees to SAA will be cancelled,” the treasury said.
The airline held more than R16 billion in government guaranteed debt, which has now largely been settled.
The budget review indicates that the treasury will also come up with further support for the South African Post Office. The entity was given R7.3 billion between 2016 and 2019 but it “has not emerged from its present financial weakness”, the treasury noted.
The treasury has pressed the department of communications to finalise a turnaround plan for the Post Office and has in the meantime included an allocation of R2.4 billion in the second adjustments appropriation bill.
The budget does not give a new allocation for Denel, and notes that of R3.4 billion allocated last year, only R204.7 million has been disbursed because the weapons maker failed to meet the conditions attached, including implementing a turnaround plan and developing a sustainable business model. Like SAA, the company did not submit financial statements for the year.
“These funds can only be disbursed if Denel substantially meets the conditions before the end of March 2023,” the treasury said.
The treasury has allocated R5.8 billion for the recapitalisation of Denel to help it recover after being hollowed out by state capture and to repurpose it as a broader industrialisation vehicle.
The budget review notes that the total assets of state-owned companies have grown, while several repaid maturing debt and “took on slightly less new debt funding”. But rising interest rates meant that the new debt was raised at a higher cost.
Total liabilities at parastatals, mainly borrowings, increased by 1.4%.
They achieved a significant improvement in return on equity, from -13.5% in the 2020-21 financial year to -1.2% in 2021-22.
“The fact that the metric remains negative, however, signifies poor long-run profitability in state-owned companies,” the treasury said, adding that their reliance on government support remained a risk to the fiscal outlook.
Transnet remains on the watchlist, despite returning to profit in the last financial year and planning to increase its capital investment over the next five years to tackle a maintenance backlog and expand infrastructure.
“Concerns remain regarding the entity’s ability to service the current demand for cargo transportation on the freight system to keep pace with tonnage growth,” the treasury said.