SAA is in talks with Zimbabwe-based mining company Imani to repatriate blocked funds from the neighbouring country.

The airline’s rescue practitioners, Les Matuson and Siviwe Dongwana, have already accepted the mining company’s offer to pay SAA in exchange for access to its funds in Zimbabwe, but are waiting for the approval from the department of public enterprises. In a letter sent to Imani on Wednesday, lawyers representing the rescue practitioners say discussions with the airline’s shareholders regarding the matter are ongoing.

Should the government accept the offer from the chrome mining company, SAA would be able to repatriate around R350-million of its revenues from ticket sales and other activities from Zimbabwe. These funds had been blocked by Zimbabwe while it tried to contain its monetary challenges such as foreign currency shortages and rising inflation.

The move to recoup the blocked funds comes amid continuing uncertainty about where the funds required to finance the cash-strapped airline’s rescue plan will come from.

Although remaining mum on the details of the transaction, SAA’s rescue practitioners told the Mail & Guardian that because the airline is under financial distress, any funding that can come into SAA would go a long way towards alleviating that distress.


Matuson and Dongwana have, however, confirmed that the airline has not received any other offer apart from Imani’s to acquire the funds from Zimbabwe.

According to the International Air Transport Association (IATA) funds are deemed to be blocked if companies are unable to transfer revenue from one place to another for a period of two months due to exchange controls imposed by the host government.

Apart from exchange controls, funds may be blocked due to shortages of foreign currency, tax laws or the obligatory submission of documentary evidence of monthly activities required by some foreign countries.

When funds are blocked, a local firm (such as Imani) can offer to pay part of the funds to the foreign firm (SAA in this case) in exchange for access to the local funds. In its final offer letter, Imani says it has over the past three years assisted JSE-listed companies to settle their foreign obligations through a RBZ-approved mechanism.

Considering the national carrier’s liquidity challenges, the mining company says its offer would be able to inject much-needed cash into the airline in a short period of time.

The rescue practitioners rejected Imani’s initial offer of R50-million sent in August.

But, puzzlingly, SAA’s unaudited financial statements for the year ending March 2019 and submitted to parliament’s standing committee on public accounts in May show that R174-million in blocked funds remain in Zimbabwe. For the previous year, combined blocked funds from Angola, Nigeria, Zimbabwe, Senegal and Côte d’Ivoire amounted to R687-million.

In response to Imani’s initial offer, the airline’s rescue practitioners requested that Imani increase its offer to R630-million, which amounts to 70% of the funds held by the Reserve Bank of Zimbabwe (RBZ).

In its final offer of R350-million, in September, Imani says its offer to SAA is fair considering  the “inherent foreign currency risk and the monetary policy uncertainty Zimbabwe has”.

“In the past two years the RBZ has gazetted a number of statutory instruments that have created confusion in the market and culminated in a number of multinationals exiting the Zimbabwean market and writing off the respective legacy debt,” the offer reads.

The RBZ’s move has resulted in foreign companies with investments in the country making huge losses on their investments.

The airline’s legacy debt or blocked funds held in Zimbabwe trades at 30% less than the interbank rate (the rate at which banks trade currencies with each other), which is meant to be the official rate, according to Imani.

Sources close to the deal have told the M&G that a response on the offer is expected at the end of October, subject to approval from the national treasury.

Scrambling for funding

The offer to acquire the loss-making airline’s blocked funds comes as the government scrambles to find the funds required to finance SAA’s business rescue plan. The M&G previously reported that the scramble was one of the reasons finance minister Tito Mboweni requested that parliament postpone the presentation of the medium-term budget policy statement by a week.

Last week, the director general of the public enterprises department, Kgathatso Tlhakudi, told parliament’s portfolio committee on public enterprises that an announcement on the funding for the rescue plan would be made during the medium-term budget speech.

In September, the airline’s rescue practitioners suspended the airline’s repatriation flights and placed SAA under care and maintenance subject to the finalisation of the funding discussions. Without the funding, the pair told creditors that the airline would go into liquidation.

The public enterprises department said in a statement that funds would be reprioritised to finalise the implementation of the airline’s business rescue plan. The department added that lending institutions would also be approached to finance the restructuring process and honour commitments for voluntary severance packages and retrenchments.

The M&G understands that these discussions have come to nought as the airline’s major lenders have no appetite to finance the airline, which is sinking under its R16.4-billion debt burden.

The airline requires at least R10-billion to finance its rescue plan.

The government says the loss-making airline has received 20 unsolicited expressions of

interest from private sector funders, private equity investors and partners for a future restructured SAA.

These discussions are ongoing, according to the public enterprises department’s spokesperson, Sam Mkokheli.

Thando Maeko is an Adamela Trust business fellow at the Mail & Guardian