There’s a lot to take in with this story below of what could potentially become a massive crisis for the South African fiscus and taxpayer.
In a telltale sign, suppliers to SAA are slashing their payment periods from 21 days to 7 days amid fears of a total collapse in the airline’s finances. This alone should signal the warning bells. The problem is that the airline finds itself in a perpetual debt trap that it just can’t escape from without government bailouts and increasingly more stringent bank guarantee terms. – Gareth van Zyl
By Paul Vecchiatto
(Bloomberg) – South African Airways’s suppliers are slashing payment periods to reduce the risk of losing out from a collapse of the troubled state carrier, which is struggling to pay lenders R5bn ($361m) due by the end of this month.
Companies with contracts with SAA are cutting settlement terms to seven days from 21 days as the creditor deadline looms, interim Chief Financial Officer Deon Fredericks said in an interview in Cape Town. The National Treasury is working to facilitate the payment, with the process “well under way,” he said.
“The problem with turning SAA around is that the board has to continuously focus on the funding issues rather than getting on with the operational plan,” said Fredericks, who started a 12-month secondment from landline company Telkom SA SOC Ltd. last month.
SAA is one of several state-owned companies in financial distress following years of mismanagement and corruption scandals while Jacob Zuma was president. The carrier last made a profit in 2011, and has been relying on government support to stay in operation. Fredericks was brought in to work with Chief Executive Officer Vuyani Jarana while the airline seeks a permanent successor to ex-CFO Phumeza Nhantsi, who was fired for misconduct in June.
If the R5bn payment is made, SAA will then have to find R9.2bn of short-term loans due by the end of March. While the Treasury allocated R5bn to SAA in last month’s mid-term budget to repay debt, the Johannesburg-based carrier has been told it’s responsible for any future restructuring. SAA is also facing a R3.5bn cash shortfall by the end of March, according to a presentation to lawmakers.
“The banks are not as friendly as they used to be,” Public Enterprises Minister Pravin Gordhan told lawmakers in Cape Town on Tuesday. “They not only want the government guarantee, but they want to know the plan to turn SAA around and if there are the skills to do so.
By: Biz News
This report does not necessarily reflects the opinion of SA-news.