State-owned airline SAA, which exited business rescue about two years ago, is no longer technically insolvent.
MPs were told on Wednesday by the Treasury that the national airline had a net equity value of R1bn at end-December. A number of Treasury officials led by its chief director of state owned enterprises (SOEs), Ravesh Rajlal, gave an update to parliament’s standing committee on appropriations on the current status of SOEs.
After exiting business rescue, SAA remained under care and maintenance until September 2021 when it resumed operations, flying to a limited number of destinations.
MPs were told that SAA’s net group loss for the first three quarters of the year of R50m was a significant improvement from the budgeted loss of R637m.
The sale of a 51% stake in SAA to the Takatso consortium — with government retaining 49% — still has to be finalised.
Takatso comprises Global Aviation, owner of the new low-cost carrier Lift, and pan-African infrastructure investor Harith General Partners. Takatso chair Tshepo Mahloele is also chair of Arena Holdings, which publishes Business Day and other titles.
SAA subsidiary Mango has been in business rescue since August 2021 and its business rescue practitioner is focusing on securing a strategic equity partner.
The other subsidiary SAA Technical (SAAT) generated a profit in the first two quarters of the 2022/2023 financial year but incurred a loss during the past quarter which has resulted in a year-to-date loss of R2.4m.
“SAAT is solvent with a positive equity value of R1.7bn as at December 31 2022,” MPs were told.
While subsidiary Air Chefs remains unprofitable, its financial performance has improved when compared to prior years. As at end-December, it had incurred a year-to-date loss of R6m which Treasury said “is a significant improvement when compared to the R195m loss incurred during the same period of the prior financial year”.
Revenue generation by the Airports Company of SA (Acsa) had been severely affected by travel restrictions and the grounding of airlines. Nevertheless its performance has continued on an upward trajectory, generating R403m in net profit for the first three quarters of 2022/2023. It incurred an unaudited loss of R1.47bn for 2021/2022.
“No additional fiscal support will be required for the foreseeable future with Acsa expected to start generating a net profit from 2023/2024,” the Treasury said.
In terms of the Land Bank, Treasury director of development finance Lefentse Radikeledi said the bank remained in the default which was triggered in April 2020. Three versions of the liability solution have been rejected by lenders thus far and the bank is presently negotiating the fourth liability solution with its lenders. Generally domestic lenders supported the latest proposal.
“[Finance minister Enoch Godongwana] is in the process of transferring the R5bn in the current financial year to Land Bank, and providing conditions that will support the utilisation of the money including curing the default and support for the blended finance programme,” Radikeledi said.
“Almost R5bn of the R7bn recapitalisation is planned to flow to Land Bank before the end of the 2022/2023 financial year. The R5bn meant to support Land Bank is still housed in the government contingency reserves fund. The remaining R2bn is targeted to repay guarantee lenders.” The World Bank has already been paid R100m for its claim.
Godongwana said the bank is at a very advanced stage in appointing a permanent CEO and filling other critical vacancies in order to help strengthen its executive leadership.
For the second quarter the bank recorded a net profit of R122m against a budgeted loss of R237m and a prior year profit of R981.4m. “The situation is improving,” Radikeledi said.
On Eskom, the Treasury noted that as at end-December, R323bn (92%) of the R350bn government guarantee facility granted to Eskom had been committed leaving R27bn unallocated for future funding. Eskom’s guarantee facility agreement is expiring at the end of March.
The commercially insolvent SA Post Office (Sapo) which has announced a plan to retrench 6,000 employees continues to struggle with revenues falling below expenses. Year-to-date revenue of R1.9bn is R1.6bn or 46% lower than budget and R590m lower (23%) than the previous year. Outstanding liabilities amounted to R5.3bn with statutory payments of R2.9bn representing 55% of this amount. Suppliers were threatening court action, MPs were told.
Arms manufacturer Denel continued to experience liquidity and solvency challenges leading to it being unable to meet its financial commitments such as guarantee obligations (resulting in the government having to step in to honour guarantee payments), supplier and salary payments and tax obligations.
“Denel is insolvent, with reported liabilities in excess of assets to the tune of R1.1bn against the budgeted R406m as at December 31 2022,” the Treasury said. “Due to poor revenue generation, the entity is unable to cover its cost base leading to operational losses.”
Freight rail, ports and logistics company Transnet continued to suffer from inefficiencies.
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