Members of Parliament have raised questions about the sale of Mango Airlines and whether enough has been done to keep the airline afloat. Some members wanted to know why the business rescue process for Mango did not happen at the same time as SAA.
But SAA chairman John Lamola explains that the low-cost carrier has been in dire financial straits and this has been exacerbated by the onset of Covid-19.
Parliament’s Portfolio Committee on Public Enterprises has learned that business rescue specialist Mango has identified a potential investor.
The Department’s Deputy Director General, Barrister Melanchthon Makobe says they expect the BRP to take the next step.
“We are waiting for the business rescue specialist to apply under the PFMA for approval; of that investor so we know who that investor is. We can then determine whether we as a government can accept what they are putting on the table, whether it is viable. We have to do our own due diligence and make sure that any offer makes commercial sense.”
SAA chairman John Lamola explained that at the time the decision was made to rescue Mango’s business, it was a mechanism to avoid liquidation as one of the creditors had applied.
He says a forensic report on the airline’s 2017/2018 financials showed that the claimed profit of more than 100 million rand was questionable.
“The theory is that low-cost carriers should be more nimble and more profitable etc. But the reality that the SAA board, as owners of 100 per cent of Mango, had to deal with Mango In April/May 2021, which was at the beginning of the financial year, Mango was unprofitable. According to its financial year results for March 2019/20, Mango made a loss of 134 million. The following year, Mango suffered a loss of 500 million rand.’
Some members were skeptical of SAA’s motives in acquiring a private investor.
ANC’s Judith Tshabalala wanted to know why SAA stopped the resumption of Mango flights in 2021, which was intended to avoid the involvement of a private investor.
She also expressed strong objections to the 100% sale of the airline. “Experience shows that the private sector is not interested in buying unprofitable state-owned enterprises. Now that Mango is an unprofitable state-owned enterprise, what then are some of the reasons why the private sector is interested in buying a state-owned enterprise? I want you to explain to Dr. Lamola why the private sector is interested in buying a state-owned enterprise when it is unprofitable.”
Lamola gave a bleak assessment of Mango’s prospects given the regulatory challenges it faces. “Mango’s license is currently suspended for two years. There is also a risk that AOC Mango will be in a dubious position because to get an Airline Operating Certificate you have to be audited by the SACAA and during that audit you have to prove that you have the position. This is a key point to ensure that when the airline restarts, it will operate safely and sustainably. Mango has no positions that would satisfy his AOC.”
