R5bn state guarantee keeps SAA in the air

Government creates joint committee to watch over parastatal’s recovery

THE DEPARTMENT of Public Enterprises has confirmed that the government had granted SAA a R5 billion guarantee for a period of two years starting September 1, 2012.

The guarantee, which was at the centre of last week’s controversial retirement of eight board members including chairwoman Cheryl Carolus, will enable SAA to borrow from the financial markets and ensure that it continues to operate as a going concern.

The provision of the guarantee means that SAA’s external auditors can now finalise the annual financial statements for the year to March 2012.

A condition of the guarantee is that the SAA board develops a turnaround strategy by January and that it is approved by Public Enterprises Minister Malusi Gigaba and Finance Minister Pravin Gordhan. The turnaround strategy will have to include SAA’s financing strategy for its planned shortand long-haul fleet.

Yesterday Vuyisile Kona, SAA’s new chairman, told Business Report that the strategy formulated by the previous board under Carolus would be scrutinised by the new directors once they had familiarised themselves with the issues. “We won’t scrap it; we will make changes to it if necessary.”

Kona said that he had met with Carolus earlier in the week to discuss the issues facing SAA. “I called Cheryl and said I needed her help and she made herself available.”

In what appears to be a bid to ensure there is no repetition of the circumstances that led to last week’s dramatic events and to ensure that the Treasury plays a more active role, the government has set up a technical committee comprising representatives of the Treasury and the Department of Public Enterprises. The committee will monitor SAA’s financial position and progress with developing and implementing the turnaround strategy.

The department’s delay in formally applying to the Treasury for the guarantee needed by SAA auditors precipitated last week’s dramatic moves as it meant the board was in contravention of the Companies Act and the Public Finance Management Act.

A joint committee, which is expected to get ongoing input from SAA, will ensure faster response times for any future financing issues.

In interviews with the media yesterday, Kona stressed that the national airline was extremely resilient and was not vulnerable to movements in personnel. “I want people to understand that people may come and go but SAA continues to operate; it is resilient. And as the board, our job is to ensure that it remains resilient.”

While the final decision to retire appeared dramatic and was made acrimonious by Gigaba blaming the board for the delay in finalising the financial statements, it is likely that most of the eight directors would have retired at the next annual general meeting.

It appears that because of the expected significant changes to the board, Carolus drew up a detailed transition plan outlining the challenges facing SAA. Kona is studying the transition plan, which he said was designed to ensure some continuity at board level.