Signing SAA R5bn Guarantee Proves Gordhan Lost Credibility


The financial crisis faced by the South African Airline (SAA) has long been attributed to numerous hidden acts of corruption yet to be unraveled.

Others and economists blame Finance Minister Pravin Gordhan for signing the R5bn guarantee without first investigating the cause of the financial failure.

Economist Dawie Roodt who seems not to comfortable with treasury’s decision to sign off on a R5bn guarantee to save SAA earlier this month, said Pravin Gordhan had lost credibility agreeing to it without investigating the state-owned business’ board chairperson Dudu Myeni.

“I have spoken to top analysts and international journalists who said he lost credibility by giving SAA a guarantee with [board chairperson Dudu] Myeni still there. We have heard what FutureGrowth had to say – they made that decision after SAA’s guarantee. Moody’s also made its announcement on state entities after that. I have a suspicion these agencies waited to see what Gordhan would do and he failed that test,” he said.

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The Finance Minister Pravin Gordhan had earlier this month, approved SAA’s application for a R5bn guarantee with conditions.

This guarantee was to allow the embattled airline to file its much-delayed annual financial results for 2014/15 as well as the 2015/16 results. He however, charged the airline to implement more aggressive cost-cutting initiatives as in areas of fuel; aircraft ownership; labour; maintenance, repair and overhaul and procurement among other things.

Roodt on his own part,  was referring to a decision last month by private lender FutureGrowth to stop lending to six state entities. The firm cited several reasons, including concerns about how they were being run, government infighting and threats to the independence of the finance ministry.

The Airways chairperson Dudu Myeni is expected to appear before the parliament on Tuesday to give vital account of the cause for the financial woes of the business put under her care.

On this , Roodt offered his take on what questions should be asked at the parliamentary meeting tomorrow.

“I would look at what impairments have not been reported on the financial statement. If you write down a huge amount of money, it means someone has made a big mistake by spending that amount of money.

“More importantly, I would want to know about the total outstanding guarantees for SAA and how much of these guarantees have already been used.

“What is the nature of the R5bn guarantee and how much interest is still owed to the state?”

The Democratic Alliance also said it was prepared to grill all those responsible for the myriad issues that plagued SAA as it would get to the bottom of the issue.

Meanwhile, analyst says Pravin Gordhan will not be left out in the parliamentary investigation following the release of its financial results, which sparked more controversy around Myeni.

The troubled state entity finally released its long-awaited preliminary financial results for the 2014/15 financial year just ahead of its deadline.

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Upon receiving the report, the DA slammed the airline for  depending heavily on government-backed guarantees, saying the results left more questions than answers.

The party’s deputy spokesman on finance Al Lees said on Sunday that the 2014/15 SAA Annual Financial Statements tabled late on Thursday‚ revealed the extent to which the state-owned airline has been mismanaged.

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