South Africa is scrambling to find extra funding to rescue South African Airways (SAA), which last month entered a form of bankruptcy protection to save the state-owned company and around 10 000 jobs.
Tito Mboweni, the country’s finance minister, told business leaders in Johannesburg ahead of the World Economic Forum annual meeting in Davos Treasury provided “financial support to the best of our abilities”.
“As of yesterday when I was speaking to the director-general of National Treasury we were still trying to find additional financing for SAA. Let’s keep fingers crossed,” he said.
SAA was promised R2 billion from government and another R2 billion from lenders. Lenders paid up but Treasury has yet to establish a mechanism for identifying and dispersing its share.
The airline is one of several state entities including state power company Eskom struggling with debt after a decade of mismanagement.
Their woes are seen as the single greatest threat to Africa’s most industrialised economy and are largely responsible for South Africa’s credit rating sinking to the brink of junk.
Fearing another downgrade if it raises its deficit, South Africa’s finance ministry has sought to fund SAA in a “fiscally neutral” manner, by selling assets or cutting costs.
Handling these issues is seen as the biggest test of President Cyril Ramaphosa’s commitment to economic reforms.
“The pace of structural reforms is not the way we want it to be, so we need to speed it up to generate this impetus to economic growth,” Mboweni said.
Without cash, SAA could quickly become insolvent.
On Wednesday, business rescue practitioners Les Matuson and Siviwe Dongwana said they were “hopeful a mechanism can be found to unlock liquidity constraints.”
A trade union official warned SAA could be forced to suspend flights and delay salary payments if government does not pay up soon.
Government’s treatment of SAA and whether it is willing to sacrifice jobs will send a signal ahead of a bigger battle with unions over ailing state utility Eskom, struggling to keep the lights on.
The Eskom chairman resigned last week after power cuts even during the low-demand holiday season. The company is also fighting the regulator in court over energy tariffs.