Government would increase its financial assistance to SAA but in a way that does not swell the country’s deficit, Finance Minister Pravin Gordhan has said. File picture: Simphiwe Mbokazi

Parliament – South African Airways remains technically insolvent and will receive a further bailout from the government in the coming financial year, according to the annual Budget unveiled by Finance Minister Pravin Gordhan on Wednesday.

“SAA pared its losses from R5.6 billion in 2014/15 to R1.5 in 2015/16. The improvements resulted mainly from lower fuel prices and lower asset impairments. However, the carrier remains technically insolvent,” Gordhan said in his Budget speech.

He recalled that the airline’s going concern status depended on state guarantees totalling R19.1 billion and said its liquidity problems were expected to persist over the medium term.

Government would increase its financial assistance to SAA but in a way that does not swell the country’s deficit, forecast at 3.1 percent of GDP in the year ahead.

“During 2017/18, government will provide some financial support to SAA in a manner that does not increase the budget deficit.”

In September, Gordhan extended another government guarantee for R5 billion to SAA to enable it to have going concern status and be able to file overdue financial results.

He said the further financial support pledged in the budget would strengthen the ability of the company’s new board to implement a turnaround strategy that would put it on the path to financial sustainability.

The minister reiterated that merging SAA with South African Express and finding it a strategic equity partner remained part of government’s plans.

He said the SAA board, headed by the highly controversial Dudu Myeni, was completing the process of finding a new chief executive officer and new chief financial officer.

“The process will be submitted for government’s consideration and approval.”

Government’s troubled state-owned companies, of which SAA is considered one of the most problematic, last year generated a combined return on equity from shareholder funds of 0.8 percent.

Gordhan said this was a high price to pay from the public purse.

“When government borrows at 8 percent and provides capital to state-owned companies that are generating a lower return on equity, it represents value lost to the public finances.”

Gordhan has come under pressure politically over SAA in the past month, with the KwaZulu-Natal branch of the ANC Youth League accusing him of blocking transformation at the airline and calling for him to be fired.

At the same time, ANC Women’s League simultaneously called for a probe into the lack of transformation at the SAA, on which Myeni has blamed the company’s financial woes.