Mango faces fresh cash crunch
THE GOVERNMENT has blamed bureaucracy as a reason behind the delays in securing funding for the troubled state-owned South African Airways (SAA) and its subsidiary, Mango Airlines.
This comes after reports that the low-cost carrier, Mango, will temporarily suspend its operations for about two months from 1 May due to a severe cash crunch at the airline.
Mango has been the saving grace for the cash-strapped SAA group of companies following a protracted business rescue process and the grounding of its aircraft due to the Covid-19 impact.
The Department of Public Enterprises (DPE) on Friday indicated that SAA and Mango’s funding process was now in the hands of lawmakers in Parliament.
DPE spokesperson Richard Mantu said the department was in discussions with the boards about the repositioning of the subsidiaries in light of the delayed funding.
“The funds to recapitalise SAA subsidiaries [amounting R2.7 billion] is awaiting the Special Appropriation Bill that has been tabled in Parliament,” Mantu said.
“Once the bill is enacted into law, then the funds will be transferred to subsidiaries.”
The suspension of Mango operations will effectively mean that the government is steadily losing grip over its aviation State assets unless it secures private equity investors.
SAA has been undergoing a business rescue process for more than 15 months now, and in spite of retrenching 3 800 workers, the process is yet to reach its finality.
A leaked internal memo to staff from Mango’s acting chief executive William Ndlovu warned of operational challenges the airline was facing, mainly lack of funding from the government.
Ndlovu told staff members that the government had informed them that there would be no money received by Mango until June.
He said this was in spite of the creditors giving the airline an ultimatum to pay by 30 April.
“This means that Mango will not be able to operate from 1st May 2021 due to no aircraft being available for operations,” Ndlovu said.
As a result, Ndlovu said Mango management proposed to temporarily stop operating and put the airline into business rescue until July when funding would have been hopefully secured.
He said this proposal was approved by both boards, and SAA board had forwarded this to DPE to support the Board approval as an ultimate shareholder.
“We are still waiting for the response and shall communicate further as soon as we get a response from DPE,” Ndlovu said.
“Therefore it is with great sadness that I inform you that our operations will temporarily stop from 1st May 2021 until such time we receive funding or complete the business rescue process should it be supported by DPE.”
BUSINESS REPORT ONLINE