Photograph — newz.ug

South African Airways (SAA) needs another round of almost $400 million to stay alive after only crawling through 2017 with the aid of several government bailouts.

South Africa’s flag carrier requires another 5 billion rands ($399 million) cash injection in the current financial year in order to meet its financial obligations, a senior treasury official said on Tuesday. According to Reuters, the National Treasury director-general, Dondo Mogajane, told parliament the cash injection could however not come from government but from private investments this time around.

The carrier, which is wholly-owned by the South African government and operates an extensive network of services throughout Africa and international services to North America, South America, Asia, Australia and Europe, has lost money in each of the past seven years and had only been relying on the benevolence of the government.

The cash-haemorrhaging airline over the past few years had received over R20 billion ($1.6 billion) to sort out its financial obligations and debts. The airline had lost R5.6 billion in 2014/15 and R1.5 billion in 2015/16. The national carrier had made a further net loss of R5.6billion in 2016/17. Last year, the government bailed SAA out with more than R5billion to avoid defaulting on its loan from Citibank and Standard Chartered.

In 2015, consultants Ernst & Young presented a report to the government into 48 of the largest contracts awarded by SAA. The report showed that 28 of them, or 60 percent, were improperly negotiated, poorly contracted or weakly managed.

Under the “new dawn” brought on by President Ramaphosa there have been notable changes to key leadership positions in public enterprises, the government appointed a permanent CEO, Vuyani Jarana, a former executive at mobile-network operator Vodacom, in November 1; and he’s been on the drive to implement a turnaround strategy for the national airline. But turnaround can only be successful on the condition that SAA gets more funding from the state to beef up its weak and over-indebted balance sheet.

However, most analysts have always emphasized the need to partly or completely privatize the airline instead of disbursing tax-payers’ money to finance a sinking boat. It was also argued that this should be followed by a total restructuring of the firm’s dealings.

It’s against this backdrop Mogajane said treasury was willing to consider selling a stake in the airliner to a private equity partner. Bringing private investments had also been considered last year by the government, with the idea of merging the three state-owned airlines (South African Airways, Mango and SAA Express) into one entity, and offering a 25 percent stake of the holding company to a private equity partner to help in both management as well as finances.

South Africa had narrowly escaped junk status in Moody ratings earlier this year due to the rapid steps taken to rescue its failing public enterprises. However, attracting private investments seems to be the safest bet for restoring profitability to one of South Africa’s largest public enterprises, which also ranks amongst Africa’s largest airlines.

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