Airlines

Is South African Airways a Funding Black Hole?

It’s that time again when South African national carrier gets additional funding to keep it afloat. The business rescue practitioners of South African Airways (SAA) have been successful in obtaining the balance of the post-commencement funding (PCF) required to meet the short term liquidity requirements of the airline.

The advancement of the funds comes on the back of the business rescue process which began on 5 December 2019, with the local commercial banks providing the initial PCF of R2 billion in addition to the existing exposures to SAA, the practitioners said in a statement on Tuesday (28 January 2020).

“Discussions held with financial institutions have been fruitful with the Development Bank of Southern Africa offering to provide the next tranche of PCF, for a total amount of R3.5 billion, with an immediate draw-down of R2 billion,” the practitioners said.

“Furthermore, funding for the restructuring phase after the plan is adopted is being considered by potential funders.”

The business rescue practitioners added that the restructuring of SAA will provide an opportunity to develop a sustainable, competitive and efficient airline with a strategic equity partner remaining the objective of government.

They added that this exercise and will result in the preservation of jobs wherever possible.

“SAA is a key strategic asset which needs to be positioned to provide reliable connectivity to markets within South Africa, the African continent as well as servicing selected international routes.

“Stakeholders of the airline should now have comfort that the rescue process is on a significantly sounder footing, and that passengers and travel agencies and airline partners may continue to book air travel on SAA with confidence.”

South African Airways – The Funding Black Hole

Since 1999, SAA has been given almost R30 billion in government bailouts. With up to R10 billion secured through private loans. Despite this, the business still fails.

Funds that should go to service delivery and servicing the needs of the poor will continue to be drawn to the struggling airline. Would giving SAA a credit line would constitute reckless lending? Send us your thoughts.

Miriro Matema
the authorMiriro Matema
Born in Zimbabwe and living in South Africa, Miriro is a seasoned publishing editor and writer, having worked with leading brands in investment, business leadership and entrepreneurship. Passionate about Africa’s development, Miriro is also a dynamic marketing consultant with 10 years experience working with startups and large multinational corporations. With a heart for travel, Miriro spends her time discovering the nooks of crannies of Africa’s hidden gems, taking the roads less travelled, meeting the beautiful people that call Africa home while exploring their food and culture. Miriro is currently a writer with Byolife Travel and Gallivant Africa

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