South African Airways (SAA) cannot become a liability, according to Finance Minister Pravin Gordhan.
Speaking during a post-cabinet briefing in Pretoria on Thursday, Gordhan told media that Treasury is stabilising the embattled national airline to ensure its profitability.
SAA, which last posted a full-year profit in 2011, confirmed to Bloomberg on Wednesday that Citigroup cancelled a R250-million banking facility for SAA on December 24, meaning SAA might not have access to free cash as of Friday.
The airline, which has been surviving on R14bn of government-debt guarantees, has asked Treasury for further guarantees amid calls that its chairperson, Dudu Myeni, be fired.
“The word bailout is used too loosely (with regard to SAA),” said Gordhan. “It is a lot more complicated than a bailout.”
“Our objective is to stabilise the airline, (and) to ensure the company returns to some form of profitability,” said Gordhan.
He said SAA must not be a liability to the fiscus.
Instead it should get to a position where it pays out dividends.
“It must learn to stand on its own two feet,” he said. “It applies to all state-owned companies.”
“Their reliance on the fiscus in the coming period is something we are going to pay attention to.”
In order to borrow, SAA has to display confidence that it has an efficient management team and will return to profitability.
He said Treasury meets SAA’s management once a week to ensure that they manage their cash properly.
Government tackling drought and education issues
Gordhan also said the ministerial committee on drought met a few days ago to take stock of the issue. “Drought is an absolute priority for us,” he said.
Regarding the student fee freeze, which President Jacob Zuma authorised after the #feesmustfall campaign last year, Gordhan said cabinet had approved amendments to national budget allocations that would shift resources to fund universities.
R2.33bn has been allocated to resolve the shortfall in operational funding for universities, said Jeff Radebe, Minister in the Presidency for Planning, Monitoring and Evaluation.
Gordhan will unveil the measures when he presents the national budget on February 24, said Radebe.
Cabinet reacts to declining rand
Talking about the declining rand, he said South Africa “must seize the opportunity of the depreciated rand to export more, particularly on the African continent”.
“We must show that we are not sitting back,” he said. “We need to take South Africa in a different direction.”
Cabinet endorsed stronger measures to restore a sustainable fiscal path, he said.
“We know that we have our own difficulties in SA,” he said. “We have structural problems; inherited, external and some internal.”
Gordhan noted that it was the emerging markets, which are currently battling, which ensured that the world did not fall into a deep recession during the financial crisis of 2008.
The rand, which is among the most traded emerging market currencies, has been particularly hard hit in recent weeks, he said.
The unit plunged to almost R18/$ at one stage this week, but has settled at around R16.55/$ on Thursday.
The global environment is regarded as particularly challenging for emerging markets, cabinet said, adding that there were some benefits from the low price of crude oil.
Cabinet called on all South Africans to recognise the challenging circumstances in the period ahead. It met to deliberate on the state of the economy and budget related matters. – Fin24