South Africa set to make SAA funding commitment, official says

JOHANNESBURG: The South African government is "on course" to provide a funding commitment for the restructuring of loss-making South African Airways (SAA), a senior official said on Friday.

The comments by the acting director-general of the Department of Public Enterprises (DPE) will ease concerns at the airline after the finance ministry told lawmakers last week it would not provide any new money.

SAA's creditors are due to meet on July 14 to vote on a restructuring plan that envisages scaling back the airline's fleet and shedding jobs but requires at least 10 billion rand ($592 million) of new funds to work.

If the government has not made a commitment on funding soon after the vote, the plan could have to be reworked or rescue efforts abandoned.

"The first thing we need to do is give an indication to the business rescue practitioners by the 15th that we are in a position to provide funding," the DPE's Kgathatso Tlhakudi told Reuters. "That we are on track to be able to achieve."

Tlhakudi said the DPE, the ministry responsible for SAA, was currently "socialising the idea" within government that it needed to do the initial heavy-lifting to clean up SAA's balance sheet.

"There are very few investors that will want to come and clean up, deal with the legacy issues, so in our engagements within government we are getting that position across."

SAA has already taken more than 20 billion rand in bailouts in the last three years alone.

Tlhakudi said the DPE was cognisant of the country's fiscal constraints and was speaking to potential investors to try to ease the burden on public finances.

The government has been approached by a major airline interested in working with SAA, but those discussions are at an early stage, he said, giving no details on what sort of partnership was under discussion. There was also interest in SAA's maintenance, catering and cargo operations, he said, without elaborating.

He said observers should not read much into the slide in a finance ministry presentation that said no more funds would be provided to SAA. "We should rely more on statements that have been made by cabinet, because that's where ultimately the call will have to be made."

The cabinet said last month that it supported efforts to restructure SAA and mobilise funds from a variety of sources, including equity partners.