National carrier SAA may be operational but it, and its subsidiaries, are unable to move forward with its growth plan without finance, according to the Chairperson of Parliament’s Standing Committee on Public Accounts, Songezo Zibi.
He was reacting to a briefing by the Auditor-General (AG) on SAA’s finances. The AG’s office briefed the committee on audits until the financial year ending in March 2022. SAA’s 2022/23 audit is currently being finalised and it has so far failed to submit financial statements for its 2023/24 audit.
After the AG’s 2016/17 audit of the airline’s finances, audits paused due to severe financial difficulties. SAA was placed under business rescue in December 2019 and released to operate again in April 2021. The AG’s office then completed the four-year backlog of audits from 2018-2022 simultaneously.
SAA emerged from insolvency in 2022, posting positive equity of R682 million (€38.4m) for the first time in five years. However, the AG’s office identified several risks in its audit findings around consequence management, executive stability and governance structures.
Lack of funding for expansion
The biggest concern highlighted by the AG’s office is lack of funding to implement the airline’s expansion plan.
“We have an entity that is out of business rescue. The entity is operational and is slowly implementing the deferred expansion plans,” said the AG’s Fhumulani Rabonda who is responsible for the SAA audit.
But certainty about funding criteria for state-owned entities is required, he added.
SAA is not able to secure loans and the money generated in its operations is not enough to finance its expansion plans, Rabonda pointed out.
“Your conclusions are kind but the actual assessment is robust. What you are saying is that SAA is in the doldrums; unable to really move because it does not have the capital to grow,” Zibi said. SAA subsidiaries like SAA Technical and Air Chefs are doomed to the same fate because they are mostly dependent on the carrier for their survival, added Zibi.
“Until there is funding for a growth strategy, they are stuck.”
Zibi said the state, as part of the business rescue process, was committed to funding the airline’s debt and receivership and anticipated that a shareholder would inject capital to finance the growth strategy. The deal to buy a stake in SAA and inject capital collapsed earlier this year. Another private-sector partner has not yet been secured.
Tough decision
“SAA is a 100% public-owned entity. We need to decide if it lives or dies and the circumstances of it living and dying. What is clear from the AG’s report is that we can’t have a situation where it is just floating along and surviving day to day,” Zibi said.
Thato Kunene, Senior Audit Manager in the AG’s office, called on the committee to take “decisive action” against entities that do not submit annual financial statements and closely monitor the challenges SAA faces in the business expansion plan.
“Failure to submit financial statements is a contravention of the Companies Act and obstructs the accountability and oversight process,” he said.
Zibi said the committee will call the Minister of Transport, Barbara Creecy, to account for SAA policy decisions and the issue of the outstanding annual financial statements.
The committee will also call SAA management to account and write to the National Treasury requesting historic information on disbursements to the airline since 2010.
