Finance Minister Tito Mboweni has confirmed that government will allocate R10.5 billion to SAA to help it implement its business rescue plan.
Mboweni was delivering his medium-term budget speech to the country on Wednesday 28 October.
“R10.5 billion is allocated to SAA to implement its business rescue plan,” said Mboweni.
This commitment is in addition to the R16.4 billion allocated in the February budget.
“This allocation is funded through reductions to the baselines of national departments, public entities and conditional grants,” Mboweni explained.
“Our approach is in line with the principle that funding to state-owned companies must come from within the current framework and reprioritised from elsewhere.”
SAA operations suspended
SAA suspended all operations in September as it waited for government to provide it with what the funding it said it required in order to enact its turnaround plan.
Mboweni has previously made it clear that he did not support the further bailout of SAA, as there are limited government funds and he believed they were best used elsewhere.
National Treasury was also reportedly reluctant to comply with government’s order to find funds to bail out SAA, as it was worried that this could cause significant issues to the nation’s fiscal credibility.
However, Public Enterprises Minister Pravin Gordhan and the ANC were insistent that SAA needed to keep flying, and this must come from state funding.
Cabinet therefore committed to the provision of this R10.5 billion figure.
This is only the beginning – expert
Peter Attard Montalto, the head of capital markets research at Intellidex, previously said that the commitment to funding SAA was a bad precedent to set.
“Whilst 10.5 billion rand may not be huge, it is only the start of what is needed in the coming years for the airline,” he said.
“The government has set itself on a slippery slope.”
The DA was also against the decision to fund SAA’s turnaround plan using state resource.
“It is astounding that there can be any consideration of budget cuts, which will inevitably impact on front-line services such as health, education and policing, when South Africa had to go cap in hand to the IMF to borrow money to deal with the Covid-19 fallout,” said DA finance spokesman Alf Lees.