South African Airways (SAA) has failed yet again to finalise its financial statements for 2016/17 and no annual general meeting (AGM) has been scheduled.
The Free Market Foundation has issued this statement, asking some hard questions about the state of the national airline.
When acting chief financial officer Phumeza Nhantsi told the parliamentary Standing Committee on Finance on 29 November 2017 that, due to lenders agreeing to reschedule loans, the airline had passed the “going concern” issue which had been the cause for the delay in finalising the accounts and that “There is no reason why the AGM cannot proceed on 19 January” – was she being entirely truthful?
Subsequently, former finance minister Gigaba asked Parliament to approve a further delay in submitting the 2016/17 financial statements of the embattled state-owned airline. His reason? “Technical difficulties”. His request was granted and the deadline is now 30 April, 13 months after SAA’s 2017 financial year-end. Yet it was also “technical difficulties” that prompted Gigaba to request an extension from the previously scheduled publication in September 2017.
What are these technical difficulties? Following the announcement of the toughest budget since 1994, with the poorest being the hardest to be hit via the 1% VAT hike, plus all the other taxes that pay for the largesse of government overspend that includes indulging in pouring billions into a state-owned airline to keep the rich flying, we, the people of South Africa, have a right to know:
* What are these technical difficulties?
* Has the Auditor General uncovered fraud and corruption? Who/what/how/when?
* When will SAA produce financial statements for 2016/7 when the end of the 2017/8 is one month away?
* When will the AGM take place?
* Did the new CEO have all the facts before he accepted the job?
* Do the new board members understand their legal responsibilities and that they could go to jail?
* When will the government stop pouring billions into a failed vanity project?
The AGM is the media and public’s opportunity to interrogate SAA management and Treasury officials and hold them to account. It is our democratic right. What right did Gigaba have to delay this? Will Minister Nene rectify this display of insolence?
That the new board directors may be in breach of their fiduciary duties is of serious concern. SAA is subject to the requirements of the Companies Act as with any other company. If there is a reason why SAA may default on a loan and/or pay suppliers, then the directors are legally obliged to inform creditors or place SAA into business rescue.
What do they know and when will they tell? The only rational explanations could be that either massive corruption has been uncovered, or SAA is in a far worse financial state than previously thought.
Government is, in effect, the custodian of the people’s money, i.e. the true shareholders of SAA are the people of South Africa. We demand answers on where our money is going and why the Auditor General is unable to sign off SAA’s financial accounts twelve months after the books closed. What is there to hide?
SAA financial status
Since the figures have not been finalised, these are the latest available. We still do not know how the R10-billion bailout recapitalisation will affect the guarantee status.
SAA is technically bankrupt and at the end of March 2018, despite the bailout of R10-billion (confirmed in the budget), SAA will still be insolvent by R9-billion and owes about R13,9-billion in outstanding long-term loans. The R10-billion is swallowed up in loan repayments and operating losses to end March 2018. After this, is anybody’s guess.
For March to September 2017, the six-month period in which half-yearly figures are released, revenue was R14,5-billion – a shortfall of R879-million – and SAA incurred a loss of R2,1-billion – R344-million more than its half-year planned budgeted loss.
Gigaba announced a 1% increase in VAT, which will raise R23-billion in tax revenue. It is worth noting that SAA’s accumulated loss over five years 2012/18 is R24,3-billion.