Members of Parliament’s standing committee on public accounts on Tuesday raised concerns about the going concern status of South African Airways.
This was an issue raised by the auditor general on the 2016/17 financial statements and was only settled after the state put a cash injection of R10bn into the airline in about October last year.
African National Congress MP Mnyamezeli Booi said it appeared that the airline had no capital to run itself.
SAA CEO Vuyani Janari noted in reply that the airline’s balance sheet was very weak with a negative equity currently of R9.2bn. This debt will mature in March 2019‚ which presented a real challenge.
“That is not the position that any business can run with‚ where it has negative equity as we have today‚” Janara told the committee. “Any business has a maximum debt carrying capacity. The moment you overburden a business with debt you get to a point where it is unable to carry its repayments‚ whether it is interest or the principal amount.
“As things stand today‚ SAA is not able to pay the principal amounts. We are bearing interest which already indicates the debt is burdensome.”
To address going concern status it was critical to address the funding of the R9.2bn and funding of the implementation of the turnaround strategy. Janara said the balance sheet could not support the acquisition of assets and its revenue was not sufficient to cover its costs‚ which meant that at the end of the financial year it reported billions of rand in losses.
In a presentation to be made tomorrow to the standing committee on appropriations‚ SAA says its current cash flow position is “unsustainable” and will become significantly worse without immediate intervention.
This is despite the R10bn cash injection by government of about half a year ago‚ which was used to service immediate debt obligations and working capital needs.
Democratic Alliance’s Alf Lees said it appeared that SAA was facing a cash crisis.
Janara said government had indicated that SAA needed a strategic equity partner‚ adding that discussions about this were taking place at a joint oversight forum which is looking at the portfolio of funding instruments for the airline.
by Linda Ensor- BusinessLIVE