SAA to be loaned R6.5bn: throwing money into a bottomless pit?

Advocates for privatisation of impotent State Owned Enterprises (SOEs) would certainly view the Treasury’s approval of a R6.5bn loan to South African Airways (SAA) as throwing money at a complex problem.
The popular view has been that appallingly poor corporate governance, not capital constraints, has lead to the organisation’s poor performance and, consequently, perennial annual losses.
The R6.5bn loan takes the government’s support pledges to R14.4bn. The Treasury has attached what it believes to be strict conditions to the loans.
SAA has been categorised as technically bankrupt and has been surviving off state-guaranteed loans, as an aging fleet and unprofitable long-haul routes contribute to heavy losses. In 2014, as it has done for the most past of the decade annually, the struggling airline asked for a cash injection.
The organisation’s end of year financials will determine whether, by continuing to support SAA, unwittingly, the Treasury is not involved into an exercise of throwing money into a bottomless pit.