Government departments will have to find yet more cuts to help fund the R10.4bn that finance minister Tito Mboweni has now reluctantly agreed to provide to failed SAA - with SA's big banks likely to provide short-term bridging finance to give the National Treasury time to raise the cash.
But the banks, which are understood to be in talks with the government over the guarantees they will require, are unwilling to provide any further support, and the government will need to clinch a deal with an equity partner to get the airline aloft again.
The scramble for the R10.4bn comes after SAA's business rescue practitioners (BRPs) last Friday told creditors they were looking at a wind-down or liquidation of the airline after the money, which the government had undertaken in July to "mobilise", failed to materialise by the September 16 deadline.
The BRPs plan to call a further meeting of creditors, but by Friday had not yet sent them a letter detailing this.
Meanwhile, however, it has become clear that the money will come out of the public purse, albeit in a "fiscally neutral" way that will not expand the envelope of government spending - with Mboweni said to be gearing up to ask his cabinet colleagues to find the R10.4bn from within their budgets to reallocate.
He is expected to announce the details in late October in his medium-term budget, which is likely to be a hugely challenging budget given that the economy is now forecast to contract by even more than the 7.1% he pencilled in when he announced his June emergency budget, making his task of stabilising the government's ballooning debt burden even more difficult.
Mboweni had already pencilled in reallocating more than R111bn of government spending in February's budget, and a further R101bn of reprioritising and reallocating to fund Covid-related spending in the June budget.
There are fears that the R19bn set aside for job creation and youth employment schemes as part of President Cyril Ramaphosa's Covid relief package might be tapped into for SAA funding.
A special appropriation bill is needed so that the Treasury can actually appropriate the R10.4bn for SAA, and this could take until November or December.
Industry sources said the banks, which had been reluctant to lend any more money for SAA, were approached to provide the bridging finance needed to enable the BRPs to pay out on commitments including the retrenchment packages that have been agreed to, as well as cover running costs and settle other liabilities in coming months.
If all they are
— Nazmeera Moola -
doing is putting
more money
down the drain, it
will be negatively
received no matter
where they find
the money
Ninety One head of SA investments
Negotiations are under way with the Treasury on the terms and conditions, including guarantees.
Public enterprises minister Pravin Gordhan is wedded to the idea of resuscitating the failed airline, which has consumed tens of billions of rands of taxpayers' money in bailouts in recent years, but Mboweni had been resolutely against pouring more money into it.
But a tweet from Mboweni earlier this week seemed to confirm the minister had bowed to cabinet pressure: "In politics you have to be a Team member! You won't like every decision but work through issues based on what is in the National Interest!" he tweeted.
And public enterprises director-general Kgathatso Tlhakudi confirmed speculation that the government would cough up when he told EWN last Friday that the government would sort out where to find the money for the "new SAA".
The department has said it is seeking a strategic equity partner for SAA, claiming there are several interested parties, but the only name being mentioned in the market is that of Ethiopian Airways, which might want to operate and control SAA rather than take a minority stake. Legislation limits foreign ownership of South African airlines to 25%.
The Treasury declined to comment on Friday, referring queries to public enterprises as the shareholder ministry. The department declined to comment, referring Business Times to the Treasury as the department had to respect Treasury processes.
Though SAA itself does not have listed bonds, the market is watching the SAA saga closely as a signal of the government's intent to make tough decisions on the budget cuts it has promised. However, reports that the government has agreed to provide SAA with R10.4bn out of the public purse do not as yet seem to have impacted on the rand or bond yields.
Ninety One head of SA investments Nazmeera Moola said markets would hate it if SAA was to be provided with R10bn so that the state could have another go at its failed strategy of running the airline.
"If all they are doing is putting more money down the drain it will be negatively received no matter where they find the money," Moola said.
However, she said: "If SAA brings in a partner that is viable, who is going to take over the running of the airline without interference from the government, it could be interesting."
Another fund manager, who asked not to be named, said it was lucky Mboweni had not threatened to resign.
However, though the cabinet decision to provide the SAA funding might not have an impact in the short term, the market is waiting to see whether it is a meaningful read-through to issues such as public sector wages.
Allocating money to SAA could undermine the government's ability to counter the court challenge brought by public sector trade unions against the decision not to implement this year's agreed pay increase. The unions could argue that if the government can find money for the airline there is no reason it can't do the same for public sector wages, the fund manager suggested.
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