Finance Minister Tito Mboweni says he has not authorised emergency funding for SAA from the NRF. (Photo: Gallo Images/Ziyaad Douglas)
Gallo Images/Ziyaad Douglas
- Minister of Finance Tito Mboweni says he has not authorised the use of funds from the National Revenue Fund for emergency funding for the embattled flag carrier.
- He does not, however, exclude the possibility of approaching “institutions” to invest pension funds for this purpose.
- About R10 billion in additional funding is needed for SAA’s rescue plan and it is as yet unclear whether government has come up with the money.
- Based on Mboweni’s affidavit submitted, the DA has removed its application to prevent the use of emergency funding from the urgent court roll.
While Minister of Finance Tito Mboweni says he has not authorised the use of funds from the National Revenue Fund for emergency funding to implement the business rescue plan of South African Airways, he does not exclude the possibility of approaching “institutions” to invest pension funds for this purpose.
“This is not the case. No such decision has been taken,” Mboweni states in an answering affidavit in an urgent application the Democratic Alliance intended to bring in the High Court in Pretoria on Tuesday to prevent section 16 of the Public Finance Management Act from being used for “emergency” funding for SAA.
Mboweni, Minister of Public Enterprises Pravin Gordhan, the directors general of their respective departments, as well as SAA and its business rescue practitioners were cited as respondents.
SAA went into business rescue in December 2019 following years of losses and repeated state bailouts. More than seven months after it went into administration, the airline’s creditors eventually voted to proceed with its proposed business rescue plan last week. This requires government or a strategic equity partner to provide an additional R10.3 billion in funding.
The flag carrier’s rescue plan stipulates that all requirements must have been fulfilled by Wednesday, July 22. If this is not the case, creditors would have to meet on Thursday, July 24 to determine whether the accepted plan must once again be amended.
If this is not accepted, the rescue practitioners might have no other option but to “discharge” the rescue process, which may leave the only option left to apply for SAA to be liquidated.
‘False premise’
In his affidavit opposing the urgent application, Mboweni says the DA’s urgent application stems from a “false” premise that he has authorised the use of funds from the National Revenue Fund to fund the implementation of the business rescue plan for the airline.
He points out that a letter of commitment he and Gordhan supplied to the rescue practitioners on July 15 as requested simply indicated that government acknowledged the funding requirements set out in the rescue plan and that it is committed to “mobilising” funding.
Mboweni sets out that there are a number of options which government may explore to “mobilise” such funding. These include government retaining a portion of the issued share capital in a newly formed airline, approaching private equity partners or strategic partners to acquire shareholding in the new airline, approaching “institutions” to invest pension funds, or approaching local private investment institutions and global investment institutions regarding funding.
“At this stage there are various options being considered and no definitive decisions have been taken,” Mboweni states. “No such decision [to fund SAA via emergency funding] has been taken. Neither is such a decision imminent.”
Mboweni mentions that Cabinet supports the proposal for a new airline and the “concerted effort” to mobilise funding from various sources, including from potential equity partners.
Application on hold
In a statement on Tuesday the DA’s finance spokesperson, Geordin Hill-Lewis, said the party welcomes Mboweni’s affidavit.
“This means the DA has achieved its immediate goal of preventing this bailout from happening secretly, behind the scenes, as happened previously when former minister Malusi Gigaba, used his ’emergency powers’ under Section 16 of the PFMA,” said Hill-Lewis.
Based on Mboweni’s affidavit, the DA has removed its application from the urgent court roll. However, the party says it has retained the application on the normal court roll, should the need arise in future to prevent the finance minister from using section 16 of the PFMA to fund SAA.
“The DA is resolute that it would be wrong for SAA to be bailed out once again, at public expense, while millions of people face such hardship. The country faces so many more urgent needs right now,” says Hill-Lewis.
For the DA Mboweni’s statement, however, raises new alarms about how SAA might be bailed out using pension funds to “invest” in a new airline. The party said it is concerned that this raises the prospect of state-owned asset manager the Public Investment Corporation being forced to give money to the airline.
DPE’s view
Acting director of the DPE, Kgathatso Tlhakudi, stated in his answering affidavit that throughout the business rescue proceedings it has been the government and the department’s stance that SAA should not be liquidated, but restructured and saved.
He points out that the DPE is on record as having stated in the past that government, as the sole shareholder of SAA, supports the business rescue plan where it results in a sustainable, competitive airline that provides integrated domestic, regional and international flight services.
Tlhakudi states that government wants to resolve the “untenable situation of the current SAA, specifically for its employees and its creditors, as well as to support important economic objectives”.
As far as he is aware section 16 of the PFMA had been invoked in the past to provide finance for SAA. This was in 2017 when City Bank was not prepared to extend its credit to SAA and had insisted on immediate payment.
That led to the repayment of the City Bank loan from the National Revenue Fund as an emergency measure to avoid a domino effect of early loan repayments.
