Fraud and theft behind SAA bankruptcy – report
While the airline is required to present its financials by the end of the month, it cannot do so as it's technically bankrupt.
SAA CEO Vuyani Jarana (pictured) has not committed to a deadline for finding a private equity partner. Picture: Moneyweb
A report in The City Press on Sunday documents the massive financial problems of state-owned airline South African Airways (SAA).
According to the report, SAA’s debt is currently R15 billion more than its assets, and banks will no longer lend the airline any money.
SAA chief executive officer Vuyani Jarana presented a report to the company’s board last week, revealing that media report on financial disarray at the company may have understated the extent of the problem.
The report details how the company’s debt increased by R2 billion in just a year; how it is currently heading towards a R6 billion loss in the current financial year; and how the airlines monthly cost of between R350 million and R450 million massively exceed its revenue.
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SAA Technical (Saat), a division of SAA that is Africa’s largest maintenance, repair and overhaul (MRO) company, is also allegedly losing around R560 million a year.
One executive told the publication that rather than problems with South Africa’s market, such as the rising fuel price, technical recession and weakening of the rand being to blame for SAA’s woes, the real problem is “fraud and theft.”
“Unfortunately, SAA has had acting people in most senior positions. The board was also fractured and there was a lot of instability. The problem here is not even the market, but within, with people stealing and committing fraud,” another executive said.
In March, it was reported that above its previous losses, SAA had made a further financial loss of R3.7 billion over the nine months to the end of 2017, as revenue dipped about R1 billion below its forecasts for that period.
The figures were tabled in a briefing by Jarana, chairman JB Magwaza and executives to parliament’s standing committee on finance. They predicted that the airline would stage a return to profitability in four years time as its turnaround strategy starts to reap fruit.
READ MORE: SAA makes a further R3.7 billion loss
But for the current financial year the company is expected to show a loss of just less than R5 billion. It is expected to table these results in April after holding its annual general meeting on Thursday.
SAA saw a decline in passenger numbers in the period under review and dropped fares in response to increased competition. At the same time running costs rose, largely as a result of steeper fuel costs.
The airline has been a burden to the national purse for years, with then finance minister Malusi Gigaba dipping into the National Revenue Fund in September last year to give it a bailout of R3 billion to prevent it from defaulting on its debt obligations to Citibank. This followed a R2.2 billion bailout in June to enable it to cover its repayments to Standard Chartered.
In February, Gigaba – shortly before he was moved to the home affairs portfolio in a Cabinet reshuffle – said government remained committed to plans to recapitalise SAA to the tune of R13 billion.