National Treasury’s decision to transfer an undisclosed sum from the National Revenue Fund to SAA to help the airline pay back loans of about R2.3 billion to Standard Chartered Bank “fails prudency, governance and accountability”.
This is the view of senior economics lecturer at Wits and former chief economist at the Industrial Development Corporation (IDC) Lumkile Mondli.
Treasury appears to have relied solely on Section 16 of the Public Finance Management Act, according to a media statement released over the weekend.
“This section of legislation states that the minister can authorise the use of funds to defray expenditure of an exceptional nature, which is currently not provided for and which cannot, without serious prejudice to the public interest, be postponed to a future parliamentary appropriation of funds.”
Azar Jammine, chief economist at Econometrix, told the media this morning the biggest blindspot with the latest bailout, one that Finance Minister Malusi Gigaba defended over the weekend as “recapitalisation”, was that Treasury imposed no conditions on the airline.
Mondli also took issue with the minister’s description of the bailout as recapitalisation, calling it semantics.
“‘Recapitalisation’ means that the cash injection will go into the equity part of the SAA balance sheet, increasing the equity capital of SAA. This is semantics by the minister. SAA needs more than R2 billion to strengthen its capital structure,” Mondli said.
Mondli believes a 50/50 (equity/debt) structure would make more sense.
He said some of the conditions Treasury had the discretion to impose, but chose not to, included the “removal of the chairman as a signal for good governance and accountability, with Tryphosa Ramano [deputy SAA board chairperson and CFO at PPC cement] taking charge”.
He said the airline also required “a viability plan and a strategic equity partner by March 18”. Former finance minister Pravin Gordhan previously called on the airline to acquire a strategic partner to exert robust corporate governance oversight on SAA.
“SAA and all the institutions are run by a shadow state led by the president under the Gupta control, whose sole purpose is to loot public resources for private benefit. This fails prudency, governance and accountability – radical economic looting in practice,” he said.
More disturbingly, Mondli said: “Credit rating agencies understand that governance and accountability in SA at state-owned entities [SOEs] has collapsed, and hence the downgrade. We are expecting private sector bondholders to be reviewing their role with SOEs.”
Ministerial spokesperson Mayihlome Tshwete was sent a series of questions, and he promised to get back to us.