A demand of 267 million South African rand (R267 million - US$17.9 million) for financially troubled national airline South Africa Airways' (SAA) government guaranteed letters of credit (L/Cs) was made and settled in the country's 2020-21 financial year.

The demand against the L/Cs was revealed in South Africa's annual budget review.

Breakaway from rescue package

The budget review does not provide any more details about the L/C demands and settlements, but it does reveal that the South African government has unilaterally broken away from the terms of the original SAA rescue package, with the taxpayer expected to foot the bill.

SAA was placed in voluntary business rescue in 2019. The stated purpose of the business rescue plan, as reported to parliament in November 2020, was "to create a value proposition within the restructured SAA which would make it an attractive proposition for a potential partner".

Rescue plan amendments

But the government admits in the budget review that in September 2020, the business rescue plan was amended, and the identified funding requirement was increased to R19.3 billion.

Of this amount, R14 billion was envisaged to come from government with the remainder sourced from strategic equity partnerships.

The latest budget review discloses a further R4.3 billion allocation to SAA in 2020-21 and R1.8 billion in 2022-23 to settle government‐guaranteed debt and interest.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.