Mr Creasy said private equity offers were “not on the table”. (Photo by Misha Jordaan/Gallo Images via Getty Images)
Transport Minister Barbara Creecy told Parliament's Standing Committee on Public Accounts Oversight (Scopa) on Tuesday that the newly debt-free SAA needs a financing facility and a private equity partner.
Creasey said there were no private equity takeover offers “on the table,” but as a shareholder he was clear about the need to find a takeover offer, whether it was another airline or a development agency.
“We are not confused,” Creecy told lawmakers.
“If you don't have an equity partner, you lose market share. If there is interest and desire, that equity partner could become a development financial institution, or if there is interest and desire, it could become another airline. There is a possibility.
“At this point in the negotiation process, we do not have any vested interests. However, we are open to equity partners.”
An initial agreement to sell a majority stake to the Takatso consortium collapsed in March amid a dispute over the airline's value, leaving it fully state-owned for the time being.
The now-defunct public enterprises arm said shortly after the deal collapsed that it would look for new investors.
In the meantime, SAA interim chairman Derek Hanekom said discussions were underway with banks to secure a line of credit that would serve as a bulwark in the event of cash flow difficulties.
“Our partnership with banks is not for the purpose of receiving loans at the moment, but rather as a kind of buffer.Although we are debt-free…we do not have much cash on hand, and in the event of an emergency, Because it makes you vulnerable” to any kind of shock.
“We don’t have anything to fall back on, so we’re really just there as a buffer.”
For the past two years, ministers and board chairs have briefed the committee in the absence of audited financial statements.
Mr Creasy said an audit of last year's financial statements was underway and expected to be completed by February, but the financial results for 2022-23 were “virtually complete”.
Scopa Chairman Songezo Zibi asked whether it was correct to think that SAA could only secure a credit facility after producing a complete financial statement, as this is a standard requirement.
Hanekom said discussions with banks were ongoing and the reaction was positive as the airline stabilized.
“Banks are looking at our plans, our business plans, and they are also looking at the unencumbered assets that we have. We have about R5 billion of unencumbered real estate, all of which goes into this It gives us the possibility to take advantage of the financing facility.”
SAA has a fleet of 16 aircraft and operates three domestic routes, two international routes and 10 regional routes. The company aims to increase its fleet to 21 vessels.
When asked by Gibi what the future holds for low-cost airline Mango, which was put into business rescue in 2021, Hanekom said it would be sold.
“The business rescue expert could remove it from business rescue by selling it, which shows he intends to do so,” he said.
“The only option is if the Minister can find a significant amount of funding if he wants to, but I would not encourage him to do that because there is none at the moment.
“There's very little that can be salvaged there.”
This is the first time Creecy will address the committee since President Cyril Ramaphosa transferred responsibility for SAA and Transnet to the Department of Transport in August.
He said Transnet had only achieved 28% of its targets in the past financial year and was operating well below industry standards, with ports making an average of 20 crane movements per hour instead of 25-30. I repeated.
“This results in longer waiting times for ships,” she said, stressing that the success of logistics companies is “probably the single biggest factor in ensuring economic stability.”
The company is also well short of its goal of shifting 200 million to 220 million tons of freight traffic annually, at which point it is estimated to begin making a meaningful contribution to the economy.
The current target is 170 million tonnes per year, and Creasey said it aims to reach 190 million tonnes by the end of 2025-26.
Her assessment after visiting ports, corridors and other facilities was that the company was falling short of its goals, due in part to a lack of coordination.
“My analysis of that visiting process was that the left and right hands were not speaking to each other properly.”
So she decided to set up a “war room,” which meets daily and, in her eyes, is working well.
“If there is a problem with a particular port, if there is a problem with a particular route, if there is a problem with a particular customer, those problems will be taken to the war room and solutions will be sought,” the minister said. ” he said.
“I think this war room is helping. It doesn’t replace the requirement for a capital injection, but it improves our current performance.
“We will not reach the level we need, which is 250 million tonnes a year, and as long as the network remains in place, we will only be able to achieve it in conjunction with private capital injections” that are state-owned. ”
Transnet has debts of R137 billion and an annual interest repayment obligation of R14 billion. Total liabilities exceeded assets by R61 billion, which led the Auditor General to warn that it may not be able to repay short-term debt on time.
In July, the company secured a R18.85-billion loan from the Southern African Development Bank, and in September, the New Development Bank, a multilateral development bank set up by BRICS countries, announced the secured a further R5 billion in financing.
Mr Creasy said the company had capital requirements of between R100 billion and R120 billion.
“Again, we're not confused. We've talked about bringing in third parties,” Creasy said.
“We hope to have a network statement by the end of the year, menu and pricing, and we are in the process of setting up the PSP.” [professional service providers] It is a division of the Development Bank. ”
Furthermore, she added: “We're doing this because one of the things we've learned from private sector participation in energy generation is that if you don't have the right equipment to enable closing, you can get a bid but not close. Because it means that there is.”
