South African Airways (SAA) said it has applied to enter ‘business rescue’, a form of bankruptcy protection it hopes will save the cash-strapped state carrier from collapse. SAA, which has been making losses since 2011, is deeply in debt and has received more than 20 billion rand ($1.36 billion) in government bailouts over the past three years — all of which has achieved little more than keeping it barely afloat.
According to Reuters, a government memo said President Cyril Ramaphosa had ordered SAA to seek the business rescue — in which a specialist takes control of a company with the aim of rehabilitating it, or at least securing a better return for creditors than liquidation would bring.
After years of government dithering, the distressed state entity’s crisis was increasingly seen as a test of Ramaphosa’s resolve to carry out badly-needed economic reforms. Years of corruption and mismanagement have put several state owned enterprises in dire straits, including power utility Eskom, whose financial problems have left it struggling to keep the lights on.
South Africa’s credit rating is teetering on the brink of junk largely because of these problems. All agencies but Moody’s have cut its rating to below investment grade, risking billions of dollars of investment outflows if Moody’s does follow suit.