Like many others, I will be happy when SAA flies as far away from the SA fiscus as possible.
The financial cost has been heavy: between 2003 and 2019, cash bailouts to SAA amounted to R31.2bn and debt, which the government must still repay, to R16.4bn. Add to this the cost of the business rescue — R16bn so far, with another R3.5bn requested — and we stand at R67.1bn over the past 20 years. Several airlines could have been bought for that.
Apart from the quantum, what has been as breathtaking is the manner in which it was obtained. Public enterprises minister Pravin Gordhan has pulled off what can be described either as a cynical manipulation of the Treasury or the work of a master political operator, admirably single-minded in getting what he wants. The Treasury was sidelined at every decision point in the process, with circumstances created such that money was so suddenly and urgently needed that the decision was a fait accompli.
In December 2019, when SAA’s business rescue began, Gordhan and finance minister Tito Mboweni agreed that the government would provide R2bn from the fiscus and that R2bn would be raised in bridging finance from commercial banks. As the Treasury funding was held up by red tape, Gordhan approached the Development Bank of Southern Africa (DBSA) and persuaded it — against its investment mandate — to grant a short-term loan to SAA. To the R2bn he added a bit more, to bring it to R3.5bn.
These funds were fast used up. SAA was burning cash, and then Covid-19 hit, stalling operations. A business rescue plan was produced by July with a costing of R10.5bn. The stumbling block was funding. But neither Gordhan nor the business rescue practitioners could secure a Treasury commitment.
Mboweni did agree to a joint letter with Gordhan in which the two said the government would “mobilise funding” for SAA. In a normal business rescue, creditors would not consider this adequate and pass the business plan. But as the largest creditors were the banks, whose money was guaranteed by the Treasury, it became final in July.
Gordhan then issued a statement welcoming “the commitment by National Treasury that the government will support and source funding for a business rescue plan for SAA”, in what was widely misinterpreted to mean Mboweni had already agreed to the bailout.
But as the R10.5bn had not in fact been agreed to, the funding failed to arrive. By September, with no funding for the plan, the business rescue practitioners were left with little choice: SAA faced liquidation.
This prospect propelled President Cyril Ramaphosa into action. Mboweni was told at a cabinet meeting that the rescue would in fact be funded and that the R10.5bn required must be allocated in the medium-term budget policy statement the following month.
What followed was a raid on departmental budgets: 41 votes were cut to pull together the R10.5bn, the biggest losers being higher education (R1.1bn) and the police (R1.2bn). Even health and education had their budgets cut, as did public transport, housing and correctional services.
In November, Gordhan told parliament’s standing committee on public accounts that there would be no more requests to the fiscus to fund SAA. No more than a couple of weeks later, he clarified this to say the cost of establishing a new SAA was not R10.5bn but R14bn. It was after this that no more money from the fiscus would be requested, he said.
Unsurprisingly, as the February budget rolled around, Gordhan requested the R3.5bn he still needed for SAA. However, Mboweni did not approve, saying he was thinking about it. We all know though that he will, once again, be confronted with a fait accompli he cannot refuse. An essential part of the strategic equity partner arrangement reached two weeks ago is that this remaining funding must flow.
After all of this, it came as no surprise that Gordhan cut the Treasury out of the negotiation to secure a new strategic equity partner for SAA. The sale of part of a state-owned entity requires finance minister approval under the Public Finance Management Act. The Treasury must, by law, be intimately involved in a due diligence study of the offer. Gordhan knows this well as his predecessor, Lynne Brown, tried precisely the same thing with state-owned arms manufacturer Denel.
Instead, the Treasury learnt about the Harith deal at the same time as any other cabinet minister, a few days before the cabinet meeting when the cabinet memorandum was sent out.
While much of this is water under the bridge, it is still a story worth telling. While the political manoeuvring was something to marvel at, the sidelining of the Treasury remains deeply disturbing.
• Paton is editor at large.
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