Why shutting down SAA could destroy South Africa: Ramaphosa

[eXisor]

They tried to negotiate some secret deal about 8 years ago. I do not know what the specifics about the SAA was back then. A s**tstorm broke lose and a number of institutions indicated their intent to make all debt payable from all SOEs back then. All negotiations were stopped immediately. This specific cross-clause in the agreement is not negotiable. It is there to protect the lenders. Any negotiations around this will open them to unnecessary risks, so this is something no one ever touches or even mention.

The big problem with focusing on only those who have issues is the fact that they also borrowed to other SOEs. Settling their debt and not the rest may leave that fear that they may risk losing out on repayments. I highly doubt that this will work. If one calls up the debt, others will jump in immediately to try and get what they want.

Well put, and thanks for that.

So Cyril's plan is....
a) No new debt with non-government creditors else no way out ever.
b) We pay off external creditors as per agreements untill all paid up.
c) We suck taxpayers dry to the tune of R5 billion every what? Two years?
d) We waste billions more within SAA due to incompetence, mismanagement and cronyism.
e) We don't fire the lot and hire the slimmest, best qualified team possible to slow the rot cause then COSATU will dump them at next election.
f) We buy fiddles cause seems like Nero knew best.

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[Visser]

Well put, and thanks for that.

So Cyril's plan is....
a) No new debt with non-government creditors else no way out ever.
b) We pay off external creditors as per agreements untill all paid up.
c) We suck taxpayers dry to the tune of R5 billion every what? Two years?
d) We waste billions more within SAA due to incompetence, mismanagement and cronyism.
e) We don't fire the lot and hire the slimmest, best qualified team possible to slow the rot cause then COSATU will dump them at next election.
f) We buy fiddles cause seems like Nero knew best.

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The problem the ANC now faces is that if they do not scale down on operations, systematically getting rid of assets or decreasing the SAA workforce by at least 80%, they will never be in a position to pay off the debts. In fact, it will only be growing. This year they will need 5BN from taxpayers, next year it will be 7BN, the year after that 9BN just to keep things afloat. That is the problem facing them now. In order to get rid of SAA's debt, the organization should be at 5% operation capability, with virtually a handful of staff members. This will enable them to use taxpayers money to target the debt and sustain the minimal operations needed for this purpose.

But, since there is a cross-debt clause protecting lenders, they still cannot close or get rid of the SAA in total before all other SOE's debts are settled in full. That is another problem for the ANC at this point in time.

 

[Compton_effect]

Why exactly did our new Minister of Finance not know this little fact before calling for its shut-down?
That is quite worrying.

 

[eXisor]

The problem the ANC now faces is that if they do not scale down on operations, systematically getting rid of assets or decreasing the SAA workforce by at least 80%, they will never be in a position to pay off the debts. In fact, it will only be growing. This year they will need 5BN from taxpayers, next year it will be 7BN, the year after that 9BN just to keep things afloat. That is the problem facing them now. In order to get rid of SAA's debt, the organization should be at 5% operation capability, with virtually a handful of staff members. This will enable them to use taxpayers money to target the debt.

Cyril doesn't have the gonads to take on Cosatu. Hasn't before, won't now, nor someday in the future. ANC may lose next election without them.
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[Visser]

Why exactly did our new Minister of Finance not know this little fact before calling for its shut-down?
That is quite worrying.

Both he and the ANC was well aware of this.

They went abroad with propaganda and lies in an attempt to scam international investors in returning investments to this country. This has not worked and is now backfiring on them.

Also, this was something the ANC never wanted to make public. On many earlier posts this fact was mentioned, but there are a lot of people on this forum who are so blinded by ANC lies and did not believe it. But, at least, now it is out in the open. Now we as tax payers knows what is awaiting us and can prepare for it.

 

[j4ck455]

The GuZumptas put Dudu Myeni in charge of SAA and kept her there for a reason (despite total incompetence revealed in at least one court ruling).

That reason was to facilitate corruption, stealing billions via hugely inflated tenders awarded to companies controlled by prominent cANCer party members, eventually the truth will be revealed during the state capture investigation and hearings, probably only after the 2019 elections.

President Ramaphosa clearly doesn't want to shake the SAA tree too much before the 2019 elections, the same goes for Eskom and the SABC and other SOEs. After the elections the gloves will be off.

 

[SauRoNZA]

So hand it over to one of the private airlines to “manage” and upon break when they get automatic ownership of the business.

Then they pay 10% of all profits back to government for X number of years.

Problem solved, everybody wins.

 

[Swa]

but isnt keeping SAA going more expensive than shutting it down?

I mean if you shut it down, you don't have to fork out more money, but if you keep it going you have to keep handing over money.

besides bad management, what else is sinking SAA? expensive planes? passenger numbers?
or is there a legitimate reason SAA is in the toilet, besides bad management.

Bad management and decisions. If you know how some of their flights are structured you'd know what the problems are. You could sell it but then you'd have two problems. 1. The debt is so massive whoever takes it on will have the same problems and it's been said you'd actually have to pay someone to take it. 2. Some large debtors (not your average office suppliers) may have to be consulted and give consent.

The most realistic scenario is selling their assets to pay off the debt and then just keep it on the books until the rest is repaid. Don't know how much it's actually worth.

 

[Willie Trombone]

but isnt keeping SAA going more expensive than shutting it down?

I mean if you shut it down, you don't have to fork out more money, but if you keep it going you have to keep handing over money.

besides bad management, what else is sinking SAA? expensive planes? passenger numbers?
or is there a legitimate reason SAA is in the toilet, besides bad management.

The major reason is running an airline. Ask Branson. One of the hardest industries to be profitable in.

 

[Swa]

The major reason is running an airline. Ask Branson. One of the hardest industries to be profitable in.

Should be able to do it with proper management especially locally as there's less competition. Heck they even own some of the competition.

 

[Zoomzoom]

They tried to negotiate some secret deal about 8 years ago. I do not know what the specifics about the SAA was back then. A s**tstorm broke lose and a number of institutions indicated their intent to make all debt payable from all SOEs back then. All negotiations were stopped immediately. This specific cross-clause in the agreement is not negotiable. It is there to protect the lenders. Any negotiations around this will open them to unnecessary risks, so this is something no one ever touches or even mention.

The big problem with focusing on only those who have issues is the fact that they also borrowed to other SOEs. Settling their debt and not the rest may leave that fear that they may risk losing out on repayments. I highly doubt that this will work. If one calls up the debt, others will jump in immediately to try and get what they want.

Someone clearly was burned with debt in Africa before.

 

[Hemi300c]

Not to mention your admittance of failure after years and years of wastage and corruption which was "supported" by the anc

 

[KleinBoontjie]

Yes, that's better, keep it open and accumulate more debt.

 

[Idiosyncratic]

but isnt keeping SAA going more expensive than shutting it down?

Nope, not in this case, and not in the foreseeable future.

THERE IS NO WAY UNDER HEAVEN OR HELL THAT ANYONE CAN TURN THE SHITSTORM THAT IS SAA AROUND.

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Not true, SAA has both the equipment and skills to make a comeback should they be utilised correctly. Sure, the debt burden is a bit much to bear, but mismanagement and corruption is what has brought us here. Fix that, and then we can talk about the future. There is no real (permanent) reason why SAA can't become profitable again.

 

[eXisor]

Nope, not in this case, and not in the foreseeable future.



Not true, SAA has both the equipment and skills to make a comeback should they be utilised correctly. Sure, the debt burden is a bit much to bear, but mismanagement and corruption is what has brought us here. Fix that, and then we can talk about the future. There is no real (permanent) reason why SAA can't become profitable again.

See definition of insanity.
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[ProfA]

Nope, not in this case, and not in the foreseeable future.



Not true, SAA has both the equipment and skills to make a comeback should they be utilised correctly. Sure, the debt burden is a bit much to bear, but mismanagement and corruption is what has brought us here. Fix that, and then we can talk about the future. There is no real (permanent) reason why SAA can't become profitable again.

Just like there is hope for the post office, Eskom, Transnet, Prasa etc.

I don't accept your hypothetical as it requires the removal of corruption which will never happen.

 

[R13...]

Not true, SAA has both the equipment and skills to make a comeback should they be utilised correctly. Sure, the debt burden is a bit much to bear, but mismanagement and corruption is what has brought us here. Fix that, and then we can talk about the future. There is no real (permanent) reason why SAA can't become profitable again.

It doesn't even have to be profitable (as in pay dividend to government), it just has to be able to make enough to service the debt. It's purpose is really propping up some of the supporting industry and employing people.

 

[WaxLyrical]

Its basically like this:
You have a credit card account thats maxed out and want to close it. You basically have to pay up the full amount owing before its technically closed.
Only option is to keep it, pay the minimum amount and you still get to use it, hoping that something (foreign loans) or someone (taxpayer) will offer some relief (bailouts) in the future.

Can understand where Cyril is coming from.

 

[Idiosyncratic]

See definition of insanity.
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There's no actual reason you can point to as to why it can never be profitable again... only sentimental "we've been trying to fix this for 10 years already and it doesn't work..." Which isn't true - we haven't actually tried to fix the airline. We just used "SAA needs fixing" as an excuse to put more corrupt pawns into management - which only accelerated the downward spiral.

Just like there is hope for the post office, Eskom, Transnet, Prasa etc.

I don't accept your hypothetical as it requires the removal of corruption which will never happen.

You make a good point. For SAA to become profitable we'll need to rid it of corruption and mismanagement. Having said that, SAA and the other SOEs will drag this country down into the ground with it if we don't. The issue is a lot bigger than "ah, just close SAA to stop the bleeding already." If SAA doesn't make a comeback, the world, as we know it, will end

 

[ProfA]

Its basically like this:
You have a credit card account thats maxed out and want to close it. You basically have to pay up the full amount owing before its technically closed.
Only option is to keep it, pay the minimum amount and you still get to use it, hoping that something (foreign loans) or someone (taxpayer) will offer some relief (bailouts) in the future.

Can understand where Cyril is coming from.

Come again? Where is the minimum amount being paid and why would you keep using it in the hopes that some angel will pay your debt? What world are you and Cyril living in?