South African Airways rescue stalls as banks hang back on funds

The planned business rescue of South African Airways is in limbo because government attempts to raise 5.3 billion rand ($307 million) of immediate funding from commercial banks failed to elicit a response, a person familiar with the situation said.

The administrators of the state-owned airline can’t hand over the business to management because it is insolvent, the person said. The banks were approached by representatives of the Department of Public Enterprises and the National Treasury, the person said, asking not to be identified as a public statement has not been made.

SAA hasn’t made money since 2011 and has survived on government bailouts—a situation Finance Minister Tito Mboweni has said is unsustainable. He has undertaken to try and “mobilize” 10.3 billion rand the airline needs to keep flying from private equity, pension funds or “strategic partners.”

The Department of Public Enterprises declined to comment and the Treasury didn’t immediately respond to a query.

B4SA, a grouping of the country’s biggest business organizations, said that with the economy in crisis banks have other priorities and shouldn’t fund the carrier.

“We don’t have the money as a country,” said Martin Kingston, chairman of the steering committee for the group and a former SAA board member. “The last thing on our list is for state-enterprise that is not essential to receive support.”