SAA is considering selling off assets after banks have refused to lend it any more money – and its debt ballooned to R15bn more than its assets at the end of July.

A senior SAA executive told City Press this week that the airline’s finances are in tatters and the Auditor-General has raised serious concerns about its viability.

SAA, which is technically bankrupt, will therefore not present its 2017/18 financials to Parliament by the end of this month, as required by law.

Senior SAA staff and a confidential report, presented at the company’s board strategy session 10 days ago, reveal that the airline’s management is now looking at a number of aggressive cost-cutting measures, including selling off its catering arm, Air Chefs, and outsourcing or selling SAA Cargo.

A top official at the national carrier told City Press that in the meantime, the company would look to government for more bailouts because banks have “hardened their attitudes” and are “continuing to refuse” to lend it more money, despite Treasury guarantees.

SAA has about R19.1bn worth of government guarantees.

In September last year, Treasury gave SAA a R3bn cash bailout to avoid defaulting on a Citibank loan.

The report, a turnaround strategy document which SAA chief executive Vuyani Jarana presented to the board last week, reveals that:

– On March 31, the last day of the 2017/18 financial year, SAA had R13bn in assets and R26bn worth of debt. But by July 31, the company’s assets remained at R13bn while its liabilities burgeoned to R28bn;

– The airline will record a R6bn loss by the end of the current financial year;

– SAA Technical (Saat), which has suffered significant losses to “fraud and theft”, is bleeding money, losing up to R560m a year in penalties from poor turnaround times for aircraft repairs and maintenance;

– SAA’s monthly costs, ranging between R350m and R450m, are significantly higher than its revenue and are not coming down fast enough; and

– SAA needs to reduce costs by 5.2% and increase revenue by the same amount to record a R1bn improvement by the end of the current financial year.

Although the report did not mention anyone by name, it slated the previous board, led by former chairperson Dudu Myeni, for leaving SAA with rampant corruption, low pilot productivity, a significantly weak balance sheet, liquidity problems, loss of confidence from suppliers, a lack of critical skills and fragmented IT systems.

“Unfortunately, SAA has had acting people in most senior positions. The board was also fractured and there was a lot of instability. The problem here is not even the market, but within, with people stealing and committing fraud,” another executive said.

“But SAA is absolutely fixable and Jarana is moving things in the right direction.”

Selling assets

Although no decision has been made to sell some of SAA’s business units, the report shows that the matter was discussed at the board meeting. Jarana, who has led SAA for almost a year, asked board members whether the SAA Group needed all the businesses “given the relative sizes and impact on financials”.

A senior SAA official said: “We continue to review our portfolio and we continue to engage with the shareholder. There is no holy cow and everything is under consideration. There is no pressure to sell anything, but does SAA really need Air Chefs?

“We are not in the business of selling food and it is not our core business. We just need ready-made food at the cheapest cost available, without having to worry about management and staffing issues.”

Regarding SAA Cargo, the document said while the division generated more than R2.1bn last year and made a R387m profit, it had major problems – including antiquated warehousing facilities, rigid pricing models and extensive dependency on aircraft that ferry passengers and cargo at the same time.

Jarana asked the board to consider a full cargo division or to outsource the business completely.

The document shows that Jarana is inclined towards outsourcing the cargo division to a private third party.

Banks won’t finance SAA

A senior SAA executive said government will have to continue funding the airline until 2021, when its balance sheet becomes self-sustainable.

“Banks have walked away from us despite our guarantees from Treasury. It is true that they don’t want to fund us. They will only fund us once they see a path to debt reduction,” he said.

“If you are a shareholder of a company and you are unable to source funds from banks, what do you do? You have to step in and rescue the situation, to the extent that you believe the turnaround strategy is worth the paper it is written on.”

The report shows that the airline will need R21.7bn between now and 2021, when it is expected to return to profitability. The R21.7bn is made up of government bailouts amounting to R12.5bn, and loans of R9.2bn.

In addition, it shows that in the current financial year, Jarana’s executive management is projecting a 5.2% loss which, according to projections, will be reduced to 1.9% in the 2019/20 fiscal year before returning to profitability, with a projected 1% profit, in 2021.

In September last year, City Press reported that Nedbank told a meeting – attended by Treasury’s director-general, Dondo Mogajane, and SAA’s former chief financial officer, Phumeza Nhantsi – that the bank would not lend money to SAA as long as Myeni was still on the board.

Nedbank was not the first bank to withdraw support for SAA. In July last year, Standard Chartered revoked its R2.207bn loan, and a month later, Citibank pulled the plug on a R1.8bn loan.

However, another SAA executive said Treasury and the department of public enterprises were in discussion with the banks to try to convince them to change their minds not only regarding the funding of SAA, but of other state-owned entities as well.

“But when it comes to SAA, a funding plan must be created. You cannot just rely on debt for such a big company. The problem with SAA is that it doesn’t sell as a brand. A brand must sell.”

The document shows that Jarana’s corporate plan was beginning to bear fruit. The plan, approved early this year, has as its focus revenue stimulation, flight schedule reorientation, organisational design, supply chain transformation and the overhauling of Saat’s logistics and operations. The report shows that during the first quarter of this year, SAA’s revenue improved.

Jarana refused to comment about the plan. However, another official said this had been brought about by the realisation of a “dramatic shift to low-cost airlines, and the executive management decided to shift four aircraft from SAA to Mango”.

In April, SAA also reduced the number of flights to London’s Heathrow from two each day to one. SAA also introduced new aircraft on this route which caused SAA to post a profit on the route for the first time in more than a decade.

A revamp of the airline’s flight schedule will involve rescheduling flights to Germany, Hong Kong, Perth and Buenos Aires to improve connectivity for passengers, capture more traffic and extract more flying hours on each aircraft, the document shows.

SAA, another executive said, was also looking at establishing new routes from West Africa to the US and London, and from Johannesburg to the Asia-Pacific region.

“We need to grow and we want to use the same aircraft to fly more,” he said. We are focusing on route profitability. The plan is to grow and become a commercially viable airline. The corporate plan has identified a number of risks and mitigation strategies.”

He blamed government for SAA’s woes, saying: “Airlines need stability. Most of the chief executives of most of the big airlines have been there for more than a decade. The mind of the shareholder is reflected on the board.”

SAA spokesperson Tlali Tlali said the airline was unable to comment because it had not seen the strategy document. “We will soon address the media on the progress we have made, milestones, and the path that lies ahead in transforming SAA … We are confident that the airline is moving in the right trajectory and we are making steady progress.”

Government is calling on all stakeholders to come together and address the escalating levels of violence in schools.

“Violence in schools is a societal problem which requires all stakeholders to play their part to create a safe schooling environment,” acting director of the Government Communication and Information System (GCIS) Phumla Williams said in a statement on Friday.

This comes after a series of shocking incidents involving students targeting teachers with violence reported at schools across the country.

“Violence [targeting] teachers is a serious problem that demands the immediate attention of parents, churches, civil society and all stakeholders in the education sector,” Williams added.

Last week News24 reported that a 17-year-old boy was facing a murder charge for stabbing and killing his teacher.

According to police, the incident happened after 11:00 on Thursday. The teacher, aged 24, was in a classroom when the pupil allegedly walked in and stabbed him, News24 reported at the time.

News24 also reported on another pupil last week who was recorded assaulting a bus driver in a video that went viral.

Appeal to parents

The attack was condemned by the Mpumalanga department of education.

“The department condemns an incident where a 19-year-old learner from Hoërskool Oosterland assaulted a bus driver on Thursday, 12 September 2018, afternoon on their way home,” department spokesperson Jasper Zwane said at the time.

As a result, Basic Education Minister Angie Motshekga has called an urgent meeting with the education sector.

“The meeting will discuss how different key stakeholders in the education sector can work together with communities to ensure that we arrest the growing unacceptable behavior at our schools. Communication and engagement with learners is key to building a conducive schooling environment,” Williams explained.

Government recognises teachers as having a valuable and significant role to play in the development of society.

“We cannot sit back and allow attacks on teachers to continue. Schools are meant to be safe for both learners and teachers. Government further reiterates that lawlessness will not be tolerated in our schools,” Williams added.

Government has also appealed to parents to play their role in ensuring children are disciplined at school.

The Department of Environmental Affairs (DEA) recently welcomed the arrest of seven suspects linked to an intelligence-based rhino horn trafficking syndicate in Mpumalanga.

Earlier this year, the DEA reported back on the Integrated Strategic Management of Rhinoceros, which places an emphasis on the government’s anti-poaching efforts.

These efforts are supported by the departments of defence, correctional services, the Hawks, the South African Police Service and the National Prosecuting Authority.

Here are 10 things you should know about rhino poaching in South Africa:

400 – The number of suspects charged with various related crimes, including rhino poaching, since January 2018.

145 – The number of weapons seized in rhino-related incidents both inside and outside the Kruger National Park since January 2018. A total of 83 rhino horns were confiscated in the same period.

60.92kg – The weight of the rhino horn confiscated and linked to poaching incidents in KwaZulu-Natal and the Northern Cape.

530 – The number of poaching-related cases on the court roll involving 750 accused and 1 738 charges.

R200 000 – The donation received from the Chinese embassy and the Chinese community in South Africa for the fight against wildlife crime.

2 000 – The number of officials trained on matters pertaining to the illegal trade in wildlife at the country’s ports of entry and exit from 2017.

28 – The total number of permits issued for the trade of rhinoceros horns, since the Constitutional Court lifted the moratorium on the domestic trade of rhino horn.

11 – The number community rhino hotspots identified and monitored by SANParks.

501 – The number of rhino poached between January 1, 2018 to August 31, 2018.

361 – The number of live rhino translocated to Botswana, Chad, Namibia, Rwanda and Zambia with the intention of establishing new rhino populations within the continent.