World News

South African Airways should be saved, says ruling ANC

By Alexander Winning

JOHANNESBURG (Reuters) – Heavily-indebted South African Airways (SAA) should be retained as a national airline but needs substantial restructuring, a top official in the governing African National Congress (ANC) party said on Wednesday.

SAA is running out of cash after the government failed to provide 2 billion rand ($138 million) of emergency funding it promised when the airline entered a form of bankruptcy protection last month.

Government officials say they still want to give SAA the promised funds, but Finance Minister Tito Mboweni is insisting the transfer be done in a way that avoids increasing the country’s budget deficit.

Time is running out for potential options that include the sale of state assets.

“SAA should be retained as a national airline, which will require substantial restructuring. The Cabinet should take the operational decisions needed to achieve this,” ANC Secretary General Ace Magashule told reporters.

Magashule, one of the ANC’s top six officials, was among those who attended a four-day meeting of ANC leaders to debate the economy and struggling state firms that ended on Monday.

SAA is among several South African state entities, including power company Eskom, that are mired in financial crisis after nearly a decade of mismanagement.

State companies’ financial problems are seen as one of the biggest threats to Africa’s most industrialized economy and have helped to push the country’s credit rating to the brink of junk status.

On Tuesday, SAA said it had canceled more than 20 domestic flights between its Johannesburg hub and Cape Town and Durban this week, and 10 international flights to and from Munich, to save dwindling cash reserves.


The airline has not made a profit since 2011 and has received more than 20 billion rand in bailouts over the last three years.

Last year the government’s patience ran out.

Public Enterprises Minister Pravin Gordhan allowed SAA to enter “business rescue,” a bankruptcy protection process that shields the airline from creditors’ demands while an independent adviser takes over.

Since then, SAA has burned through 2 billion rand of funds from lenders.

Finance Minister Mboweni told state broadcaster SABC in an interview at the World Economic Forum in Davos that officials from his ministry were “working feverishly” to secure the extra 2 billion rand SAA urgently needs.

“It’s very important that happens in a fiscally-neutral way because we don’t have an appropriations bill that can find an additional 2 billion rand,” he said. “We will try to support SAA as much as we can.”

(Reporting by Alexander Winning; Editing by Olivia Kumwenda-Mtambo and Barbara Lewis)