In a report to Parliament’s watchdog public accounts committee, South African Airways has insisted that it will not submit its outstanding annual financial statements (AFS) until the government guarantees its going concern status through additional funding
The SAA board acknowledged in the report sent to the Standing Committee on Public Accounts on Monday that it had received further financial help in the medium-term budget policy statement, but said it still needs “specific commitments for its working capital requirements”, and added that “inconsistent” remarks from government about further funding has left it in limbo.
“Securing funding continues to be a challenge. SAA cannot finalise its AFS, within the prescribed time, until the going concern status is confirmed. This can only currently be enabled by the shareholder through financial support in the form of additional equity capital (for working capital purposes) or issuing of guarantees in support of loan funding in a timely manner,” it added.
“To date, the shareholder has not confirmed this.”
At issue is SAA’s outstanding annual financial statements for 2017/18 and 2018/19.
The airline, arguably at its lowest ebb after a wage strike that cost an estimated R50 million a day, referred to the provision of the Companies Act that states an enterprise must be able to show that it will be able to pay its debts as these become due in the 12-month period following the submission of its results.
“Financial statements are prepared on the basis that the entity is a going concern and will continue its operations for the foreseeable future – at least 12 months after being approved. SAA is concerned about the risk associated with a disclaimed audit opinion from the Auditor-General (AG) on business operations and liquidity.”
It said it has asked the AG to provide it with a draft disclaimed audit opinion but he declined to do so.
“During various interactions with the AG over the 2018 external audit the company made it known that it required the support of the lenders and government to extend the maturity of its legacy debt of R9.2 billion for a period longer than 12 months.”
The board said SAA had received sufficient funds for working capital for the 12 months following the signing off of its statements to ensure liquidity and support an assumption of going concern status, but confusion about government’s position has scared off potential lenders.
“There was also no indication from the shareholder that guarantees and financial support would not be made available. However, given the recent inconsistent messages from government about support for SAA it has created huge uncertainty. It must also be noted that in various engagements with the lenders to satisfy the going concern assumption for the 2018 AFS, the lenders were not willing to extend facilities even on the strength of government guarantees.
“This led to continuous delays and the resultant subsequent recapitalisation from the shareholder was not timely. The hesitant and inconsistent approach to addressing the recapitalisation of SAA has made it difficult for the board to conclude on its going concern status.”
SAA has received about R57 billion in financial support from government in the past 23 years
Finance Minister Tito Mboweni has given assurances that the legacy debt will be paid but has repeatedly said National Treasury cannot allow SAA to continue on its current trajectory and has raised the spectre of closing it. Public Enterprises Minister Pravin Gordhan has taken a more lenient approach.
The board said it considered the option of preparing financial statements on a liquidation basis but could not do so either because government did not formally withdraw its support.
It reiterated that the financial statements for the past year have been prepared but said it was taking the view that it will not approve these or submit them for audit unless the airline’s going concern status becomes certain.
The board said it would meet to reconsider its options.
SAA infuriated members of Parliament (MPs) serving on the Standing Committee on Public Accounts last week when it cancelled a meeting on its financial statements and other issues pertaining to its current crisis, at short notice.
Author: ANA Newswire