National Treasury has released South African Airways’ (SAA) financial presentation after Parliament’s Standing Committee on Finance (SCOF) postponed its meeting to review the national carrier’s fourth quarter results.
The fourth quarter presentation, which was meant to be presented at the SCOF meeting, revealed that SAA’s net losses were R1.2 billion – well above the budgeted amount. The airline had budgeted a loss of R610 million in the fourth quarter, with actual losses at R1.84 billion.
The losses reported in the presentation were mainly driven by revenue and currency translation losses.
The presentation showed that for the year, the group’s net loss was R2.9 billion worse than budget, driven both by revenue and operating costs performance below budget. The presentation showed that the actual loss was R5.6 billion from the budgeted net loss of R2.8 billion
The SCOF meeting, which was meant to be held on Wednesday, was postponed due to a lack of agreement on whether the session should be held in committee or in public.
“This emanates from the application made by the chairperson of the Standing Committee on Finance to have some of the presentations by South African Airways (SAA) held in private in order to protect the confidentiality of some of SAA’s strategies,” said the Finance Ministry on Wednesday.
The ministry said the national carrier, unlike many other State-owned enterprises (SOEs) which operate as sole providers of services, SAA is a commercial enterprise which operates in a highly competitive environment.
“The duty to account to a parliamentary committee must be balanced with the degree of protection of the confidentiality of SAA’s commercial strategies.”
In February, SAA presented its turnaround strategy to SCOF and it was accepted and supported.
The same strategy was presented to the Standing Committee on Appropriations (SCOA) in March. On Wednesday, SAA was due to present its fourth quarter report as part of the normal parliamentary report cycle.
“It would appear that there was a disagreement amongst committee members as to whether there was a committee resolution to have some of SAA’s meetings held in committee only. The committee then postponed the presentation by SAA in order to consult its own records regarding the decision.
“After a comprehensive review of this issue, and having taken into account the need to protect SAA’s commercially sensitive strategies whilst staying within the governance prescripts, we have decided to make SAA’s fourth quarter presentation available to the public,” the ministry said, stressing that the need to protect SAA’s commercial strategies cannot be overemphasised.
“We are encouraged by the committee’s intention to conduct some of the reviews of SAA reports in private. Holding some of the reviews in committee will allow members of parliament to have an in-depth engagement with SAA’s leadership while protecting SAA’s commercial strategies.”
In its presentation, the national carrier said an oversight forum has been set up to address liquidity and capital challenges.
“National Treasury and the Board of Directors of SAA have decided to form a joint task force (oversight forum). The oversight forum seeks to ensure that the conditions for successful strategic recovery of SAA, as directed by the Minister of Finance, are in place and further endeavour to enhance SAA and National Treasury collaborative efforts,” read the presentation.
Among the objectives of the forum is to address the immediate liquidity challenges facing SAA, determine the long-term funding requirements of SAA and determine the optimal capital structure for the airline.
The forum commenced operations in March and will continue to do so until September.
Concerns raised by the Auditor General
When coming to the Auditor General’s findings, SAA has a detailed project plan which is being implemented.
Among the concerns raised by the AG in 2016/17 in the airline’s qualification areas was the issue of property, aircraft and equipment of which the root causes were the annual review of useful lives and residual values on owned aircraft.
This also was due to a lack of property ownership between SAA and South African Airways Technical (SAAT) among others. SAA said work to resolve this is ongoing with the Chief Financial Officers (CFOs) of both entities working on the matter, which is targeted to be resolved this month.
The AG had also expressed concern around the issue of the airline’s property, plant and equipment (PPE), with the root causes being the carrying value of assets more than recoverable amounts and accelerated depreciation on some assets.
SAA was moved from the Department of Public Enterprises to National Treasury in December 2014.