Breaking News

SAA & SAX merger - two losses don't make a profit

by FMF
27 August 2018 | 862 Views
Is the proposed merger between loss making South African Airways (SAA) and SA Express (SAX) a marriage made in hell brokered by SA banks?

According to Banking Council chair Cas Coovadia in recent media statements, the banks are willing to answer Public Enterprise Minister Pravin Gordhan's appeal for financial assistance for failing state-owned enterprises (SOEs). Yet, in the SA Express (SAX) presentation to Parliament's portfolio committee on public enterprises in May 2018, members were told that the banks were no longer committed to supporting the airline without a clear turn-around plan. This means government - taxpayer - funding.

So, why the U-turn? What sweeteners have been offered that the banks seem now prepared to absorb SAX debt into their loans for SAA? What price is the SA taxpayer in for?

Banks are commercial, listed companies with shareholders and customers: have they considered the losses and the debt that SAX will bring onto SAA's balance sheet? The national airline has asked government for R21.7bn, which includes R9.2bn in debt to support yet another turn-around plan until 2021. Is further financial aid to SAA from the private banking sector justified? It may be legal but is it moral and ethical to continue to use shareholder funds to prop up a failing apartheid dinosaur which subsidies the rich to fly at the expense of the poor?

SAA has not made a profit since 2011. It made a larger than expected loss of R5.6bn in 2017/8. SAX latest results "paint a grim" picture according to the portfolio committee. It is unable to meet operational financial obligations, or pay bills on time, or have its latest financial statements signed off by the Auditor-General. The recent grounding of its fleet due to non-compliance with safety issues is a major concern.

Gordhan has said that the reason for the merger of the three airlines (including Mango), is to rationalise the utilisation of aircraft and routes to improve operational efficiency, just two of a myriad of problems at SAA. The R21.7bn excludes the purchase of new planes which are essential if SAA is to remain competitive in the international aviation market. CEO Vuyani Jarana called this a "catch 22" situation. This fact alone renders any further state financial aid irrelevant and irresponsible.

Government has stated there will be no more bailouts, despite a leaked report that R59bn will be made available for SOEs. Government guarantees for SAA stand at R19.1bn. Would further bank lending then mean raising the level of guarantees to cover both SAA's debt requirement - the R22.7bn on the table - and the debt dowry that SAX will bring to the SAA bed? The final amount is anyone's guess.




Of course, the bank are, well, laughing all the way to the bank. It is risk free business at likely higher than normal interest rates. So what if SAA defaults on its debt, government will never default on its guarantees as this would mean SA Inc is bankrupt. Or would it?

Government guarantees to SOEs stand at more than R450bn, according to data from the National Treasury, and this debt has been flagged as a serious concern by credit-rating agencies.

Local and international banks have been complicit in allowing SOEs to continue their mismanagement, looting and wasteful expenditure by constantly extending loans to corrupt and technically bankrupt SOEs.  

The total loans and bonds extended by South Africa's biggest banks to struggling SOEs amounted to R54.6bn by end September 2017, according to central bank data. (Source Bloomberg).



South African Airways SA Express Cas Coovadia

Source: FMF

Comments

Latest News

Will the system change if Chiwenga collapsed and died today?

by Hopewell Chin'ono | 18 August 2019 | 136 Views

Zimbabwe Constitution ignored - The Zimbabwe government has made it cl...

by Zimbabwe Vigil Diary | 18 August 2019 | 84 Views

Mnangagwa back from SADC Summit - President Emmerson Mnangagwa has arr...

by Staff reporter | 18 August 2019 | 501 Views

South African buffalo is nakéd, media goes on mute

by Zanele Lwana | 18 August 2019 | 639 Views

UZ investigating student accommodation scandal

by Staff reporter | 18 August 2019 | 556 Views

Caps United beat Bosso - Caps United 2 - 1 HighlandersCAPS took a huge...

by Staff reporter | 18 August 2019 | 406 Views

Another blow for Chamisa's MDC - POLICE in Bulawayo have banned an MDC...

by Staff reporter | 18 August 2019 | 1559 Views

SADC declares Zim solidarity day

by Staff reporter | 18 August 2019 | 1425 Views

Chamisa's MDC to appeal against demo ban

by Staff reporter | 18 August 2019 | 1453 Views

High Court dismisses application to stop MDC march - The Bulawayo High...

by Staff reporter | 18 August 2019 | 5589 Views

AU, UN to hear SADC position on sanctions, says Mnangagwa - President ...

by Staff reporter | 18 August 2019 | 1668 Views

Bad news for Mnangagwa faction

by Mary-Kate Kahari | 18 August 2019 | 14098 Views

Lumumba urges Zimbabwe political leaders to save 'this great country'

by Staff reporter | 18 August 2019 | 4183 Views

Chamisa says despot Mugabe is better than Mnangagwa

by Staff reporter | 18 August 2019 | 2068 Views

Phelekezela Mphoko speaks on arrest saga

by Mandla Ndlovu | 18 August 2019 | 7941 Views

Jonathan Moyo calls for UN invasion of Zimbabwe

by Staff Reporter | 18 August 2019 | 8118 Views

Police set to block MDC Alliance Bulawayo demos - Indications are that...

by Staff Reporter | 18 August 2019 | 1772 Views

Obert Mpofu behind Chief Ndiweni jail sentence, claims Coltart

by Staff Reporter | 18 August 2019 | 3121 Views

BREAKING: MDC Bulawayo demonstration stopped

by Mandla Ndlovu | 18 August 2019 | 7678 Views

Fellow Zimbabweans, could you please help me find my young children wh...

by Ryton Dzimiri | 18 August 2019 | 2425 Views

Mphoko wants ZACC to arrest Mnangagwa, Mugabe

by newzimbabwe | 18 August 2019 | 4865 Views

Pastor in hot soup over ID - A Zimbabwean pastor who was recently arre...

by Staff reporter | 18 August 2019 | 1485 Views

Gukurahundi victim documents horror story

by Staff reporter | 18 August 2019 | 850 Views

Lobengula descendants want Dabengwa honoured

by Staff reporter | 18 August 2019 | 687 Views

Man accused of stealing wheelbarrow - A Bulawayo man has been arrested...

by Staff reporter | 18 August 2019 | 378 Views

Chamisa, Mnangagwa need to compromise, says Coltart

by Staff reporter | 18 August 2019 | 891 Views

Vuzu parties stoke fears of upsurge in HIV cases - The raging phenomen...

by Staff reporter | 18 August 2019 | 451 Views

Zacc probes Mupfumira prison conditions

by Staff reporter | 18 August 2019 | 1070 Views

Entertainment

Zimfest delivers another 'phenomenal' festival

by Tidi Kwidini | 07 August 2019 | 629 Views

Should you be betting on reality TV show outcome too?

by Staff Writer | 05 August 2019 | 82 Views

WATCH: Jah Prayzah featuring Iyasa Sadza nemuriwo song

by Mandla Ndlovu | 23 July 2019 | 5595 Views

Muvhango star Marang Phala visits Prophet Sovi's church

by Mandla Ndlovu | 22 July 2019 | 9567 Views

Pure Black set to take Africa by storm

by Mandla Ndlovu | 04 July 2019 | 997 Views

'Cook Off' movie set for UK premiere

by Agencies | 02 July 2019 | 812 Views

Zimbabwean rapper teams up with top selling American singer

by Staff Reporter | 17 June 2019 | 1319 Views