Government officials are working out exactly how much money South African Airways (SAA) still needs from National Treasury in order to settle legacy debt and bring the finalisation of the strategic equity partnership deal with the Takatso Consortium one step closer.
Takatso, chosen as SAA's strategic equity partner already more than a year ago, is not prepared to take on any of the airline's legacy debt. Investment firm Harith and Global Airways, owner of the LIFT airline, are the Takatso partners. Takatso is expected to provide much-needed capital for the airline's continued operations - to the tune of R3 billion over two years.
But SAA will face liquidation if the strategic equity partnership deal with the Takatso Consortium does not work out, the Department of Public Enterprises (DPE) told Parliament on Wednesday.
The last time SAA received money from Treasury was R10.5-billion in the Medium-term Budget Policy Statement (MTBPS) of former finance minister Tito Mboweni in October 2020 to implement the airline's business rescue plan. This was less than the R14-billion the DPE had asked for, as it also wanted funding to help SAA's subsidiaries Mango, SAA Technical and Air Chefs.
The DPE then obtained a special allocation from the SAA money for the subsidiaries, leaving a gap in what still had to be settled in terms of the business rescue plan. The R3.5-billion still due to SAA's creditors at the time was placed in a so-called receivership - "a special purpose entity" - in March 2021, to allow for SAA to be regarded as solvent, not carrying significant debt on its books, and exit business rescue.
SAA's interim chair and acting CEO John Lamola recently told News24 Business that the first tranche due in terms of the receivership was paid last year. He did not indicate how much this was. By the end of July this year, when the second tranche became due, SAA paid R550-million from its own money to creditors. A third and last tranche payment is due in the coming months.
The DPE is likely now pinning its hopes on Finance Minister Enoch Godongwana's MTBPS in October to obtain about R3.5-billion to settle SAA's historic debt.
"The amount of R3.5-billion is an indicative obligation to cover concurrent creditors, lessors, and un-flown ticket liabilities as per the approved business rescue plan. The R3.5-billion will ensure that business rescue obligations are met, and that SAA's cash used to pay these obligations over the last two years is replenished," SAA responded on Thursday. "The actual quantum of what is to be remitted from the National Treasury is being worked out by government officials."
Approval from the Competition Commission and the Air Service Licensing Council is also still needed before Takatso can finally get the green light to obtain a 51% share in SAA.
The DPE indicated to Parliament earlier this week that SAA will face liquidation if the Takatso deal does not work out.
The receivers have indicated to News24 Business in the past that, in their view, if the funding needed by the receivership is not received, SAA's creditors and lenders could then take action against SAA itself for not adhering to what was agreed in the airline's business rescue plan.