Govt could approach pension fund institutions to invest in new SAA – Mboweni

Finance Minister Tito Mboweni. Image credit: Twitter/National Treasury

Finance Minister Tito Mboweni has outlined several options the government is exploring to mobilise funding for a new South African Airways (SAA).

In an affidavit filed at the Pretoria high court Monday, Mboweni denied the Democratic Alliance’s (DA) claim that he was planning to use section 16 of the Public Finance Management Act (PFMA) to fund SAA’s business rescue plan.

Instead, the government is looking at other options – including approaching institutions to invest pension funds in the new airline, Mboweni wrote. He listed the following:

  • Government may retain a portion of the issued share capital in the newly formed airline.
  • Private equity partners may be approached to acquire shareholding in the new airline.
  • Strategic partners may be approached to acquire shareholding in the new airline.
  • Institutions may be approached for investment of pension funds.
  • Local private investment institutions and global investment institutions may be approached.

No decisions taken

The Minister emphasised that “no definitive decisions have been taken” at this stage. He further maintained that the government had not committed to funding the requirements of SAA’s business rescue plan, but to “mobilising funding.”

Following Mboweni’s assurance that he was not planning to use section 16 of PFMA to fund SAA’s plan, the DA announced on Tuesday that it was withdrawing its urgent court application against such a decision.

In a statement, DA MP Geordin Hill-Lewis said, “However, we have retained our 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.

“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.”

DA to oppose using pension funds

Hill-Lewis however expressed concern at Mboweni’s suggestion of using pension funds because it “raises the prospect of the Public Investment Corporation being forced to give money to SAA.”

“The DA will oppose any publicly-funded bailout of SAA, whether through direct cash, government guaranteed loans, or an attempt to abuse pension funds,” he said.

According to the SAA business rescue plan adopted last week, R10.1 billion is required to restructure the airline, stabilise its balance sheet and provide working capital for its entities.

“The restructuring will include severance packages to about 2,700 SAA employees who will be retrenched, which packages meet the minimum requirements of the Labour Relations Act, and the provides incentives to those employees at the lower rung of the remuneration scale to ensure that they are not worse off,” the Department of Public Enterprises said in a statement.

Last month, the Cabinet endorsed the business rescue plan and “the concerted effort to mobilise funding from various sources, including from potential equity partners for the uptake of the new airline.”

The troubled airline was placed under business rescue in December 2019 following years of mismanagement and government bailouts running into billions of rand.

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