You are here: Buzz SAA Financial Chaos: FMF submits PAIA applications re SAA and SAX overdue financial statements
The Free Market Foundation (FMF) is submitting PAIA applications to enable the public to understand the true extent of the financial chaos that exists within South African Airways (SAA) and SA Express (SAX). Following the resignation letter of CEO Jarana, it is even more urgent that financial accounts for SAA, low cost subsidiary Mango, and SAX are subject to public scrutiny before any more government and bank bailouts are made. Business Day 4 June reports that “SAA needs R16.7bn in a combination of direct transfers from the fiscus, new loans or a debt rollover”. Even that sum, enough for 170,000 RDP houses, would be tens of billions short of SAA’s and SAX’s real needs as Jarana understood.
His successor is tipped to be current SAX CEO Siza Mzimela. This must not happen without a full investigation into financial irregularity at SAX under her watch.
To date financial statements are not available for either airline. PAIA is an application under the Promotion of Access to Information Act 2000 for access to records of a private body. As a human rights policy institute, the FMF seeks to exercise and protect the section 32(1)(a) right to access to information.
According to industry experts, while Mzimela was CEO, SAX deliberately, probably fraudulently, overstated its assets by valuing component parts of its aircraft, instead of the aircraft themselves, followed by generous executive bonus payments. SAX may now be unable to value its fleet properly without reflecting a massive loss and balance sheet write-down. SAX planes were grounded by the regulator, SACAA, for safety reasons in 2018.
Little information is publicly known about the financial position of SAX as AFS (audited financial statements) were last available in March 2016. However, in a Report from the Standing Committee on Appropriations on 27 November 2018, Treasury said that SAX was technically insolvent as the company’s liabilities exceeded its assets, and that R 1.24bn had been allocated to settle government guaranteed debt.
The Report stated that SAX told the committee that financial challenges included a weak balance sheet, long outstanding debts, frozen credit lines, liquidity challenges, monthly cash flow problems, and high employee costs. Other problems included a low staff morale, high staff turnover, high level of management vacancies, onerous contracts, zero accountability, and a shortage of skills. SAX said that it expected to make a loss of R669m in FY 2018/19. Industry insiders predict a higher sum.
Yet, in a recent media interview published in Daily Maverick, SAX CEO Siza Mzimela said SAX would be profitable by March 2019. That date has come and gone. The FMF’s PAIA request asks on what basis this prediction was made when the evidence suggests the opposite.
SAA has not released AFS since 31 March 2017 when it posted a heavy R5.4bn loss. Financial statements for FY 31 March 2018 are more than 12 months overdue but SAA did inform Parliament that it had made a R5.6bn loss in that year. SAA received a R5bn government bailout in October 2018. Government assistance in terms of guarantees and bailouts since 2007, totals a staggering R42bn with more required.
This is unacceptable both in the billions diverted from programmes to uplift the poor and in the lack of accountability. A listed company has three months following its financial year end to post results before it faces JSE sanctions.
Before Mzimela is appointed, the public has a right to know what has happened at SAX, not only in terms of its asset register, but whether and to what extent the airline has possibly been subsidised by SAA and other state-owned entities in the aviation sector.
The FMF PAIA application requests the following: