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South African Airways (SAA), which has already registered losses of about 18 billion rupees over the last decade, needs about 17 billion rupees of public funds, or bank refinancings, to during the next three months to continue their operations, MPs told their leaders on Tuesday.
An immediate priority is to convince the banks to lend him 3.5 billion rand by December in order to have working capital. Otherwise, he may be unable to pay suppliers and staff.
It will have to raise an additional 4 billion rand in March, as well as refinance or repay 9.2 billion rand of maturing loans.
With the 5 billion rand allocated to the airline in the medium-term budget in October, this will bring the total SAA financing costs to RAF 21.7 billion for its recovery plan.
The airline has run out of public finances over the past decade and has received 60 billion rubles in life over the past 23 years, according to Financial Mail calculations. The rating agencies have described state-owned, mismanaged and looted companies during the outrageous presidency of Jacob Zuma as constituting the biggest threat to the viability of South Africa's finances.
The electricity supplier Eskom, which enjoys about 350 billion rand of state guarantees and is considered the main risk for the economy, is expected to publish its latest financial results on Wednesday.
The battle to rectify SAA has led to calls recently launched by Finance Minister Tito Mboweni for closure or sale. The government's position is that the airline can be saved and put on a sustainable foundation to attract an investment partner.
While the turnaround strategy initially provided for SAA to be sustainable by 2020, CEO Vuyani Jarana said the date had been postponed for one year due to higher than expected fuel prices.
Jarana said that it would not be possible to lift the entire 16.7 billion rubles of banks and that it would require more "shareholder support", as government guarantees are no longer sufficient to attract commercial lenders. "The banks have asked for two things: they want to see SAA on the path of profitability and debt reduction.To reduce the debt, we must inject equity," he said.
The Minister of Public Enterprises, Pravin Gordhan, who also attended the information meeting before the Public Enterprises Portfolio Committee, avoided discussing the government's future financial commitments.
"SAA has its own wish list and they will have to work with the Minister of Finance and myself to get better access to cash.
"There must be tangible evidence of improved revenues.Banks are not as friendly as before."
Since he's been named to his portfolio, Gordhan has been fighting for commercial lenders to open the taps. Banks stopped lending money to state-owned companies in July 2017, at the height of looting.
Gordhan's initiative to set up a "combined credit facility" ranging from 30 to 40 billion rand from banks to state-owned enterprises has not yet started, with banks raising many concerns about the plan.
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