Gordhan says SAA bailout paves the way for viable new airline
CAPE TOWN – Public Enterprises Minister Pravin Gordhan on Thursday welcomed the in-year allocation of R10.5 billion to South African Airways, saying it had prevented the liquidation of the airline at great financial and human cost.
“Failure to allocate the funds would have resulted in the liquidation of the airline at the cost of more than R18.5-billion,” Gordhan said in a statement the day after Finance Minister Tito Mboweni announced the bailout in the medium-term budget policy statement.
“Further, the liquidation would have meant that SAA employees would have been worse off and received a maximum of approximately R32 000 per staff member, regardless of years of service, to the extent that there are funds available,” Gordhan continued.
“They will only receive payment once the final liquidation and distribution account has been approved which can take up to 24 months.”
The money will fund the implementation of a business rescue plan for the shuttered airline, adopted in July.
Gordhan has consistently argued the case for reviving the carrier and said the rescue plan was “the only option to bring the airline back from the brink to a position where employees, suppliers, and business partners can continue to contribute to the South African economy and its integration into the global economy”.
He said the allocation would allow the appointment of an interim board and senior executives, fund a voluntary severance package, help to settle SAA’s legacy debt and pave the way for the selection of a suitable private equity partner to support the launch of a new airline.
Mboweni’s decision to avail the money in a mid-term budget that cautioned South Africa was skirting close to a sovereign debt crisis has been slammed by opposition parties.
Gordhan said the criticism revealed ignorance.
He was “shocked and disappointed with the Democratic Alliance, other parties and some analysts’ lack of insight, financial literacy and understanding of governance processes. Worse, the DA ignores the suffering of SAA employees and the threat of losing their jobs.”
He added that by enabling the implementation of the business rescue plan, government would in time be partnering with the private sector in the launch of a new airline and this would ultimately relieve the burden on the fiscus.
– African News Agency (ANA)