Pravin Gordhan, South Africa‘s minister for public enterprises, is staking his own credibility and that of President Cyril Ramaphosa‘s government on the creation of a new airline out of the ashes of the bankrupt national carrier.
Hit by the loss of the country’s last investment-grade rating on its sovereign debt and the COVID-19 pandemic, Ramaphosa has said hard choices will need to be made as the country restructures its economy. What the state decides to do with South African Airways could be a litmus test for that resolve.
SAA hasn’t made a profit since 2011 and was surviving on state bailouts and government-guaranteed debt even before the coronavirus forced the grounding of almost all its planes. Both Gordhan and the team of business-rescue experts currently running the airline have suggested a strategic investment partner could help restore the airline, but with carriers worldwide expected to burn through $61 billion in the second quarter alone the list of potential buyers looks thin.
And while South Africa’s National Treasury has found money for SAA in the past, the state’s finances have been severely stretched by efforts to contain COVID-19. The economy is forecast to contract as much as 16% this year and lose as many as 7 million jobs, and Ramaphosa last month announced a 500-billion rand support package to contain the fallout.