South Africa has not committed to fund SAA rescue plan, finmin says

The South African government has not committed to fund a restructuring plan for struggling South African Airways (SAA), Finance Minister Tito Mboweni said in court papers seen by Reuters on Tuesday. Administrators took over SAA in December after almost a decade of financial losses and last week creditors approved the restructuring plan, which requires at least 10 billion rand ($600 million) of new funds, on the understanding the government would find the necessary cash.

The South African government has not committed to funding a restructuring plan for struggling South African Airways (SAA), Finance Minister Tito Mboweni said in court papers seen by Reuters on Tuesday.

Administrators took over SAA in December after almost a decade of financial losses and last week creditors approved the restructuring plan, which requires at least 10 billion rands ($600 million) of new funds, on the understanding the government would find the necessary cash. Mboweni said in an affidavit filed in the High Court that options the government might explore to mobilize funds included approaching institutions for the investment of pension funds, private equity partners, or other strategic partners who might want to acquire a shareholding in a restructured SAA.

The minister was responding to a court case launched by the country's largest opposition party, the Democratic Alliance, which wants to block Mboweni from using emergency powers to channel public funds to SAA. Mboweni and Public Enterprises Minister Pravin Gordhan sent a letter last week to SAA's administrators which committed to "mobilizing funding" for the plan.

Mboweni also said in the court papers that no definitive decisions had been taken on how funds would be sourced for SAA. He also said he had not used his powers to authorize the use of funds from the National Revenue Fund, nor was such a move imminent. The finance ministry has not yet responded to a Reuters request for comment.

SAA's administrators need certain conditions to be met by Wednesday for their restructuring plan to be implemented. One of them is that the government finds money for the plan. Their rescue plan envisages scaling back the airline's fleet and shedding jobs before gradually ramping up operations as the disruption caused by COVID-19 eases. ($1 = 16.5541 rand)