South African Airways (SAA) remains on life support thanks to loans from the government of South Africa. This is not news and it likely not going to change. But now the South African government is facing issues paying off its SAA-related debt.
I suppose we should be thankful that the South African government did not just print the 1.8 billion Rands ($135million) needed to sustain SAA over the last few months, but the government also did not have that money lying around. Instead, it had to borrow the money from lenders like Citibank at an interest rate not disclosed. And it wasn’t just the 1.8 billion Rands. To date, the government owes creditors billions of additional Rand.
6.9 billion Rands ($516million) is due at the end of September and now Treasury Director General Dondo Mogajane is “in talks with Citibank on how to settle” the debt.
We owe Citibank about 1.8 billion rand. We had an understanding with them to roll (the debt) to September. Citi did indicate to us that they will not be in a position to roll further and we engaged them. It’s an ongoing consultation.
And as for the other creditors?
We are engaging the lenders, so as much as 6.9 billion rand is due on paper it might just be that we don’t have to pay the 6.9 billion, consultations continue.
It’s a difficult situation, isn’t it? South African Airways cannot seem to make money and continues to drag down the entire South African government (in terms of bond ratings / credibility). Now the government has even talked of tapping the government pension funds to keep SAA afloat.
CONCLUSION
Keep an eye out on South African Airways. Like Alitalia and other inefficient state-backed carriers I expect it to grown for reasons of prestige and the multiplier effect of SAA in the greater South African economy. But it’s dragging the country down, month after month, year after year.
This airline desperately needs to go bankrupt and get restructured to become an efficient modern entity. But thats not going to happen in the corrupt environment, so perhaps it would be better everyone if it just went the way of Air Berlin.
Remember that this is the airline that even Etihad refused to invest in !
That hurts!
South Africa=Zimbabwe ver. 2.0 coming up?