No more bailouts for SAA, which must close down, Treasury says

There will be no more bailouts for SAA and the airline should be closed, the Treasury said in parliament on Friday.

Outlining the plans for various state-owned enterprises (SOEs), the Treasury said in a written presentation to parliament's two finance committees that the action to be taken on SAA, SA Express and state-owned diamond mine Alexkor was that they be closed.

In relation to these three entities, the Treasury said that “no further action [is] required in terms of bailouts except [to] settle guaranteed debt as [the] entity is insolvent and the business rescue practitioners have not released turnaround plans.”

No provision was made in the supplementary budget for a bail out of SAA.

The stance of the Treasury is in direct conflict with the position adopted by public enterprises minister Pravin Gordhan, who has endeavoured to salvage the airline to form the basis of a new one.

The ANC is also adamant that SA have a national airline.

The SAA business rescue plan will cost the government at least R26bn, R16.4bn of which is for the repayment of funders.

Other costs, working capital, retrenchment costs and other debts amount to about another R10bn.

DA MP Alf Lees welcomed the Treasury's decision saying the department of public enterprises “continues to mislead the public that funds for the SAA business rescue plan, proposed by the business rescue practitioners, have been budgeted for”.

Treasury acting head of assets and liabilities Tshepiso Moahloli told MPs the state has sunk a total of about R291bn into state owned enterprises since 2008/2009.

She added that that the February budget had allocated almost R129.2bn to state-owned entities over the next three years.

The bulk of this will go to Eskom, which is saddled with debt of more than R450bn.

With regard to Alexkor, the Treasury said the mine should be closed and its mining rights transferred to the state owned African Exploration Mining and Finance Corporation in a bid to consolidate mining operations.

Denel should cut costs through retrenchments, voluntary severance packages and reducing salaries; dispose of non core assets and introduce a strategic equity partner for three of its subsidiaries including Denel Dynamics.

Denel’s property assets should be consolidated with those of Eskom and Transnet.

Regarding the SABC, Treasury said the financials of the state broadcaster should separate its development and commercial mandates and all non-profitable commercial operations should be stopped, or disposed of “as a matter of urgency”.

Transnet should introduce private sector participation for ports and rail and introduce greater incentives for concessionaires on dormant branch lines.

The recommendations for Eskom included cutting costs for municipalities and Soweto to settle outstanding debt, for the Eskom Finance Company to be disposed of and for the Eskom road map to be implemented.

As for the SA Post Office, the Treasury said the next steps were for it to focus on its development mandate to provide services and goods to underserviced areas.

All nonprofitable commercial operations and subsidiaries should be disposed of.

Finally, dealing with the Central Energy Fund, the Treasury said its gas-to-liquid operation, PetroSA, should be fixed and a policy framework developed to deal with the liquid fuels sector that would address whether there is a need for a national oil company.

Immediate liquidity challenges would have to be addressed and the balance sheet restructured.

There is a “high probability that recapitalisation will be required,” the Treasury said.