The annual financial statements that SAA failed to submit to parliament for four consecutive years paint a picture of a dysfunctional airline that racked up a combined R23.5bn in losses.
Fuel costs, aircraft maintenance, employee remuneration and aircraft lease costs gobbled up most of the revenue. Accommodation and refreshment costs were above R1bn in 2018/19 and 2019/20 but were contained in subsequent years to under R35m.
The audit reports on SAA’s financial statements were finally tabled on Friday after public enterprises minister Pravin Gordhan wrote to parliament to explain why the airline was unable to submit audited financial statements.
SAA went into voluntary business rescue at the end of 2019. The government has identified Takatso as a strategic equity partner. The negotiations are still ongoing. Before that, the government pumped billions in bailouts into the national carrier. But bad management, state capture and contraventions of competition law — leading to hefty fines — eventually grounded the airline.
It made a loss before tax of R6.5bn in 2018/19, R5.7bn in 2019/20, R7.6bn in 2020/21 and R3.7bn in 2021/22. It had total liabilities of R9bn in 2021/22.
The directors are satisfied that SAA can continue to operate as a going concern. The consolidated annual financial statements were therefore prepared on this basis
— SAA 2022 annual report
The 2019 annual report highlighted a trend of accommodation and refreshment costs breaching the R1bn mark in each between year 2017 and 2019.
It spent R1.075bn on food and accommodation in 2019/20. Airline revenue dropped from R28.1bn to R26bn in this period.
The 2019/20 report acknowledged that group revenue decreased by R2.4bn, as SAA’s international revenues fell by R1bn and domestic revenues dropped by R1.1bn.
Fuel and other energy costs peaked at R8bn in 2019/20 before settling at R369m in 2022. Commissions and network charges went from R1.5bn in 2019 to R164m in 2022.
In 2021, SAA was in business rescue for the full period. The group was hit by Covid lockdowns. The business rescue plan was approved during that time.
Airline revenue for the group plummeted from R23.2bn in 2020 to R2.3bn in 2021.
The 2019/20 annual report noted that group revenue decreased from R26bn to R23.2bn after SAA entered business rescue and was unable to persuade travel insurance companies to cover ticket purchases, which had an impact on sales. It swung to an operating loss of R4.6bn.
“The impact of Covid-19 was felt on travel patterns from February 2020 as intercontinental travel demand dropped,” the director’s report for 2020 said.
Auditor-general Tsakani Maluleke issued disclaimers to SAA, the latest one in the 2022 report, saying she could not get enough audit evidence for items including the SAA employee share trust and SAA travel centre due to the non-submission of separate financial statements.
She was also not provided with enough evidence that steps were taken against officials who incurred irregular expenditure of R37.7bn — up from R32.6bn in 2021 — due to failure to maintain records to support the investigations.
Maluleke said she could not determine whether further adjustments were necessary to airline revenue stated at R2.3bn and R1.4bn.
Mango, the low-cost airline now in a business rescue wrangle between the government and a potential bidder, did not provide sufficient appropriate audit evidence for airline revenue due to the status of record-keeping.
“I was unable to confirm the airline revenue by alternative means. Consequently, I was unable to determine whether any adjustment was necessary to the airline revenue stated at R1.59bn from R2.38bn in 2021,” she said.
Maluleke said that in the prior year, she could not find enough audit evidence for freight and mail revenue due to the status of record-keeping and could not confirm this by alternative means.
The tabling of the reports came amid anger among MPs this week over Gordhan’s refusal to share the shortlist of bidders and the sale purchase agreement that SAA signed with Takatso as part of its strategic equity partnership arrangement.
In the 2022 annual report, SAA interim chair Derek Hanekom and interim CEO John Lamola said that after evaluating its going-concern assumptions, SAA was in a positive equity position for the first time in years.
“The directors are satisfied that SAA can continue to operate as a going concern. The consolidated annual financial statements were therefore prepared on this basis.”
They said SAA received R6.9bn in funding from the shareholder during the year for the repayment of legacy debt of R4.1bn and the recapitalisation of subsidiaries at R2.7bn.
In a letter to the speakers of the National Assembly and National Council of Provinces, Gordhan said he was finally able to table the SAA annual reports, annual financial statements and audit reports on those statements from 2019 to 2022.
He said the auditor-general was now auditing SAA’s 2022/23 annual financial statements and this process was expected to conclude in April next year.
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