Mboweni: Government exploring various funding sources for SAA

Finance Minister Tito Mboweni says no definitive action has been taken regarding funding South African Airways (SAA) – especially not the use of his “emergency” powers in the Public Finance Management Act (PFMA) to release the bailout from the government. 

Mboweni has stated categorically that he has not used section 16 of the PFMA, which allows him to bypass normal budgetary processes for cases of an “exceptional nature which is currently not provided for and which cannot, without serious prejudice to the public interest, be postponed to a future parliamentary appropriation of funds”. 

The government recently committed to mobilising the funding required for SAA’s restructuring requirements. 

This was in fulfilment of one of the preconditions that needs to be met in order for the business rescue plan to be considered “implementable” by rescue practitioners Les Matuson and Siviwe Dongwana. 

Exploring various funding mechanisms 

“No decision has been taken and neither is such a decision imminent,” said Mboweni in a responding affidavit to the Democratic Alliance’s (DA’s) application to interdict him from invoking section 16. 

The DA’s application was launched after the Mboweni failed to respond to a legal notice asking him to clarify if government’s commitment to “mobilise” the over R10 billion funding needed for SAA meant that he would authorise the use of the section to release it from the National Revenue Fund.

A move which they said would be “unlawful” since SAA did not meet the provisions of exceptionalism, public interest and urgency.

Read: DA files urgent court bid to interdict ‘unlawful’ SAA bailout

“The assumption is plainly incorrect. I have not decided to authorise the use of funds under section 16. Furthermore, the applicants have failed to provide any factual basis for the mistaken assumption,” said Mboweni. 

Mboweni points out that  “the wording of the letter is significant”. 

“Government has not committed to funding the requirements of the business rescue plan, but instead committed to mobilising funding for the short-, medium- and long-term requirements, to create a viable sustainable new South African national airline,” said Mboweni. 

Mboweni listed five options government is considering to “mobilise the requisite funding:

• Government may retain a portion of the issued share capital 
• Private equity partners  
• Strategic partners 
• Institutions may be approached for investment of pension funds 
• Local private investment institutions and global investment institutions 

Flawed assumptions 

The minister goes on to say he was given an “unreasonable deadline” to respond to the DA’s legal notice asking for clarification on how Treasury would handle the SAA bailout. 

He explains that he was “seized with other matters” and the fact that the party instituted legal proceedings on the same day without allowing a proper opportunity to respond was evidence that “there was never a genuine intention to engage”. 

The DA has since made a move to withdraw the urgent application which would have been heard on Tuesday. 

Read: Will restructured SAA take flight?

In a letter sent by the DA’s lawyers, it states that Mboweni had enough time to provide clarity on this allegation and was not only sent one letter asking for an explanation. 

On July 15 the DA’s Geordin Hill-Lewis had sent a separate letter to Mboweni on the very same issue the lawyer’s had sent.

“It is regrettable that your client stubbornly refused to provide clear answers to our clients and the court until the afternoon before this application was set down for hearing. Had your client simply and timeously confirmed that no decision had been made, this litigation could have been avoided,” they say. 

Conditions conditions

Hill-Lewis said the party has however retained its application on the normal court roll “should the need arise in future to prevent the minister using Section 16 of the PFMA for the same purpose.”

“On the basis of Mboweni’s commitment, we are satisfied that there is no need for an urgent hearing, although we remain on high alert for other illegitimate attempts to fund SAA,” said Hill-Lewis.

“The DA is resolute that it would be wrong for SAA to be bailed out once again, at public expense, while millions of people face such hardship. The country faces so many more urgent needs right now.”

The deadline for all the preconditions which have to be met in order to implement the SAA deadline is July 22. The rescue practitioners are expected to release an update on whether this has been done, possibly revealing if government’s letter is sufficient.

If the conditions are not met, including the acceptance of the voluntary severance packages by all unions and non-organised staff representatives, the plan will be considered “unimplementable” and a meeting of creditors to consider amending the plan will take place on July 24.