Connect with us

Hi, what are you looking for?

Cyprian Is Nyakundi

General

Collapsing Airline

[ad_1]

South Africa’s state-owned flag carrier is on the brink of financial collapse after it paid only half of staff salaries this month and struggled to secure funds to survive.

South African Airways suffered a “sudden deterioration” in its finances after a recent strike grounded flights, Pravin Gordhan, minister for state-owned companies, said on Wednesday.

The government is working with the airline “to urgently formulate immediate actions that will be required to provide support to enable SAA to carry on its business,” he said.

The airline, once Africa’s largest, may have to file for liquidation if it cannot secure R2bn ($135m) of working capital in the next few days, people familiar with the matter said.

SAA needs a government guarantee to borrow the capital from banks but Tito Mboweni, the finance minister, has been reluctant to approve further bailouts.

The airline’s fate poses a dilemma for President Cyril Ramaphosa, who has pledged to turn round state companies that were looted under his predecessor, Jacob Zuma. But he is also under pressure to shore up strained public finances.

This month’s strike over planned job cuts grounded SAA domestic and international flights for days as Mr Ramaphosa’s government clashed with unions.

SAA has needed billions of dollars in state aid to stay aloft in the past two decades but graft and waste have left it struggling to compete with resurgent African and Gulf airlines.

“SAA competes in a cut-throat industry with razor-thin margins. There are 50 airlines serving South Africa,” said Martin Kingston, a member of SAA’s board.

The airline has failed to produce accounts for the past two years because of doubts as to whether it remains a going concern.

Mr Mboweni’s Treasury has already agreed to repay R9.2bn in debts that will come due for the airline in the next three years.

However, last month Mr Mboweni drew a line over handing over more money for an airline that he regards as a middle-class subsidy in a deeply unequal society.

Mr Mboweni is battling to find funds to bail out Eskom, the blackout-prone state power monopoly whose $30bn debts dwarf SAA. Eskom is deemed a higher priority as it generates nearly all of South Africa’s electricity.

“The minister of finance is in an extremely difficult situation. He is highly fiscally constrained and one has to ask whether he and he can continually, in his words, bail out SOEs,” Mr Kingston said.

SAA and South Africa’s Treasury did not immediately respond to requests for comment.

A liquidation may impose steep costs on Mr Ramaphosa’s government, as it would have to pay out on guarantees to lenders to SAA in a default.

Solidarity, a South African trade union, has applied to place SAA in business rescue, a liquidation alternative. But bankers have said that this would be impractical as business rescue requires financial resources SAA does not have.

[ad_2]

Source link


Would you like to get published on this Popular Blog? You can now email Cyprian Nyakundi any breaking news, Exposes, story ideas, human interest articles or interesting videos on: [email protected] Videos and pictures can be sent to +254 710 280 973 on WhatsApp, Signal and Telegram.


Comments

comments

Click to comment

Facebook

You May Also Like

News

*Editor’s Note: This open letter to Safaricom has been published as received. No redactions have taken place to avoid legal issues pending a court...

News

This is an intervention for Victoria Rubadiri so as to help her revert back to factory settings. We notice your slow drift away into...

News

Caption : Edwin Kigen Who was Murdered in Madaraka Estate. We demand for answers from Boinnet ! Another young man may have been brutally assaulted and...

News

CAPTION: Reformed street-urchins like this lot are dominating the airwaves and being allowed to spread the disease of anti-intellectualism.  As you may have all...

Copyright © 2020 Cyprian Is Nyakundi.