State-owned South African Airways (SAA) has been operating at a considerable loss since 2011 and in the last three years has been the beneficiary of government bailouts totalling some 20 billion rand (US$1.4 billion) which has done little other than allow it to remain operational.
On Monday December 12, South Africa’s prime minister, Cyril Ramaphosa announced that there was no other financially viable or workable option other than to place the carrier on “business rescue”, a form of bankruptcy protection where a specialist adviser takes control of a company in order to restructure it.
“The financial crisis had become so grave that the only way to secure its survival was to take this extraordinary measure,” Ramaphosa said in his weekly newsletter. According to Reuters news agency, SAA has been granted a 4 billion rand (US$272 million) lifeline from the government and banks to launch the rescue plan, though analysts have indicated that this sum will only be sufficient for a few months.
According to the Minister of Public Enterprises, Pravin Gordhan, the decision to rescue the airline, rather than let it fail, as some analysts have argued, would save many of the 10,000 jobs at SAA. A number of state-owned enterprises such as SAA have suffered at the hands of corruption and mismanagement, and Ramaphosa has been charged with carrying out badly needed economic reform. “We will not allow any of these strategic entities to fail. Rather, we need to take all necessary steps – even drastic ones – to restore them to health,” he said.