Appropriations Committees question adjustment allocation of R1.249 billion to SA Express
The allocation of R1.249 billion to the South African Express airline, as stipulated in the 2018 Adjustments Appropriation Bill, was today questioned by a joint meeting of the Standing and Select Committees on Appropriations.
The committees received briefings from the National Treasury on the Adjustments Appropriations Bill [B35-2018] and the Special Appropriation Bill of R5 billion, which is part of the SAA bailout intervention. The Department of Public Enterprise also provided some inputs with regards to the SAA turn-around strategy.
The meeting asked National Treasury (NT) whether this allocation is a loan or a buy-in of shares, how this will be paid and whether an assessment was made before these allocations were done. Since treasury officials were not ready to address these questions, the meeting instructed officials to provide the committees with a comprehensive brief on Friday, 23 November 2018.
The meeting also questioned the R30 million allocated to the Department of Public Works (DPW), which was used for official state funerals. NT officials said that the department is allocated an annual budget of R10 million, to be used for the various categories of official state funerals. However, it was difficult to do accurate budget projections for state funerals. DPW had to cover three state funerals during the 2017/18 financial year, including the funeral of the late Ms Winnie Madikizela-Mandela and Mr Zola Skweyiya. This meant that an additional R20 million had to be reprioritised and classified under unforeseeable and unavoidable expenses.
Meanwhile, the Department of Public Enterprises (DPE), which is once again responsible for the South African Airways (SAA), reported that the DPE is considering the possible introduction of a strategic equity partner. Department officials said that despite previous bail-outs for SAA, including the R5 billion under consideration, the airline will still be insolvent. The DPE needs to find other ways of improving SAA’s balance sheet.
SAA told the committee that forecasts estimate that the airline will be profitable by 2021 and will incur financial loses of R5.2 billion and R1.9 billion for the 2018/19 and 2019/20 financial years respectively.
The committees wanted to know what distinguished SAA’s current turn-around strategy from the ones presented to Parliament previously, which have not been successful.
SAA officials said that the new management understands what is needed to turn the airline around, in terms of capacity, funding and decision-making. The officials also said that SAA needs to all its shareholders – the board, labour and many other stakeholders – to align their purpose. A lack of action and commitment will undermine the turn-around plan, however, the current management team is taking difficult decisions, which was not the case previously.
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