The 17 acreages that Shell submitted for renewal purposes were: OMLs 11, 17, 20, 21, 22, 23, 25, 27, 28 31, 32, 33, 35, 36, 43, 45 and 46. The properties were due to expire in 2019.
The acreages revoked include OMLs 31, 33 and 36.
Licences for 13 of the remaining 14 leases were renewed but the DPR proposed that OML 11 be split into three because it is too large (2,800sq km). Those renewed have a new lease of life for another 20 years.
Shell will have a new OML 11, which is one of the three tracts carved out from the old OML 11, but it can apply for only one of the remaining two, according to ranking sources at the Ministry of Petroleum Resources in Abuja.
In other words, the DPR expects Shell to re-apply for the “new” acreages carved out of OML 11, either in sum or in parts, but ministry sources say that the company is unlikely to be re-awarded all the three. Shell had not re-applied as of April 17, 2018.
The old OML 11 was actually under a Shell divestment programme when the AngloDutch giant applied for its renewal; Shell is talking with Transcorp, a Nigerian company which is scouting for $1Billion to pay for 45% of OMLs 11 &17. It is not clear how that transaction will work under the government’s “split it to three acreages” instruction.
Other interests, including a company named Robo Michael, claiming to be championing a community cause, have laid claim to those parts of the old OML 11 which lie in Ogoniland, a piece of territory where Shell had been refused access by the communities for upwards of 23 years. Bodo, Bodo West and Yorla fields, all in Ogoniland, are in the south of the old OML 11. It’s not clear where they would be, when the government concludes the split.
But a renewal of OML 11 licence, either in wholesale or in pieces, improves the investment climate around the asset.
Transcorp has struggled, without success, to raise money to purchase the 45% because of the nearness of the licence expiry date.
South African Airways needs R5 billion. NOW.
That is what the national carrier’s new CEO Vuyani Jarana told Parliament’s Standing Committee on Public Accounts (Scopa) on April 24.
The R5 billion is in addition to the R10 billion it got from the fiscus in the previous financial year to restore its status as a going concern.
And that is nowhere near the end of it. Not even close.
According to deputy finance minister Mondli Gungubele SAA needs at least R20 billion in order to break even by 2021. That is R9.2 billion to repay debt that matures in March next year and another R12 billion to address its “negative equity position”.
To give a sense of scale, it cost about R27 billion to construct the Gautrain system. And Comair’s market capitalisation is R3 billion. R21 billion is equal to the allocation in the 2018/19 Mpumalanga provincial budget for education and amounts to 43% of the total provincial budget. At an operational level SAA loses money on each and every domestic and most international routes. In the first nine months of 2017/18 its loss was 71% above budget at R3.7 billion. Operating costs increased. Revenue and passenger numbers declined.
Expenses exceed income by R370 million per month.
To be profitable and compete with its peers, it needs new aircraft. It cannot buy new aircraft, because nobody would lend it money on the basis of its weak balance sheet. Jarana in fact called it a “catch 22”.
Against this background trade union Solidarity is planning to apply to the High Court to place SAA in business rescue. Head of Solidarity Research Institute Connie Mulder told Moneyweb the trade union will file its papers on May 15 and has decided on this course of action in an effort to prevent SAA from being liquidated.
Solidarity believes SAA can still be saved and with it, the jobs of a few hundred of its members.
Free Market Foundation executive director Leon Louw differs sharply. He says the only viable options are liquidation or privatisation. It is too late to “rescue” SAA, Louw says. “Bailing out SAA is financially reckless and irresponsible. The scale of the amount of money required is so gargantuan that it can never be fixed and it will certainly never be a going concern able to compete in the world of modern aviation,” Louw says.
SAA’s troubles are nothing new. In 2015 its own acting CEO Thuli Mpshe and legal counsel Ursula Fikelepi advised the SAA board that the group is financially distressed, trading under insolvent circumstances and therefore trading recklessly. The board should apply for business rescue or liquidation, they stated.
Moneyweb has seen a board resolution dating back even further, to September 19 2014 and signed by seven of the eleven board members, that SAA would proceed with business rescue proceedings unless government committed to providing a going concern guarantee within a week.
Transport economist Dr Joachim Vermooten points out that the court would only grant Solidarity’s application if it can show that there is a reasonable prospect of rescuing the group.
It is very late in the day for SAA, Vermooten says. Whether the court can be convinced, remains to be seen. The Auditor-General has stated that it is not a going concern. Vermooten further points out that over and above the required amounts provided to parliament, no number has yet been put to the turnaround plan.
A proper restructuring would require additional funds for SAA to buy out onerous agreements and employment contracts.
So far, the plans are totally unrealistic, he says. And even if the plan were realistic, it would have to be funded.
Vermooten says it will be much more efficient to wind down SAA in its current form and start a new, focused airline, free of all the legacy contracts, over-staffing, inefficiencies and culture of reliance on the shareholder.
This has been done before, he says.
When state-owned Swiss Air landed itself in trouble through over-expansion the Swiss government refrained from bailing it out and allowed it to be liquidated. It subsequently bought Cross Air and successfully converted it into Swiss International, an airline with a limited mandate that was later acquired by Lufthansa.
In a similar example the Belgian government decided against bailing out struggling Sabena Air. The provincial government in Brussels instructed Brussels Airline to service selected sustainable routes. This new airline traded profitably and was also later bought by Lufthansa.
Vermooten says rather than scaling down existing SAA operations, government should start a new airline that does not necessarily need to be government-owned in the long run. Such an airline, if it reflects the values of the South African nation, could still serve as a national carrier, Vermooten says.
He says government should carefully consider what it is it needs from the national carrier and only focus on that. Sell low-cost SAA subsidiary Mango, split SAA Technical into a separate business and consider listing it and sell Air Chefs, he says. When Scopa met the SAA leadership last week, Scopa chairman Themba Godi listened to all the plans to address the multiple problems at SAA. New policies, new staff, new inventory management systems, new IT systems….
Godi remarked that it sounds as if the theme is building a whole new airline.
Perhaps that is exactly what they should be doing.
Source: Read more on Moneyweb
The United States has threatened to cut funding to South Africa, after it emerged that South Africa is among the countries in the United Nations that is most likely to vote against the US.
The US, through its USAID programme, provides funding for South African health services (related to diseases such as HIV/Aids and tuberculosis), basic education, and assistance for small and medium enterprises. In 2016, USAID’s total foreign assistance to South Africa amounted to US$459.7-million.
The threat to cut funding came after Nikki Haley, the US ambassador to the UN, warned in December that her government would be “taking names” of the countries who did not vote with America on the recognition of Jerusalem as the capital of Israel.
At the time, the US had lost a vote inside the UN to declare Jerusalem as the Israeli capital and had been widely condemned for taking the position against international consensus.
The US has now compiled its UN Voting Practices Report for 2017 and determined exactly which UN member states are likely to vote in its favour or against it.
South Africa, it found, is among the 10 countries in the UN who are least likely to vote with the US, and may therefore, Haley argued, be among the countries who are not deserving of American funding.
The UN Voting Practices Report also found that of the 93 resolutions that were voted in 2017, other UN member countries only voted with the US on an average of 31% of these resolutions. It amounts to a 10% drop since US President Donald Trump came into office.
But now, as part of the Trump administration’s “America first” policy - which prioritises the interests of US sovereignty - the government is seeking to donate to countries that give it an “acceptable return” on its investment.
“The American people pay 22% of the UN budget – more than the next three highest donor countries combined. In spite of this generosity, the rest of the UN voted with us only 31% of the time, a lower rate than in 2016. That’s because we care more about being right than popular and are once again standing up for our interests and values,” Haley said in a statement earlier this week.
“Either way, this is not an acceptable return on our investment. When we arrived at the UN last year, we said we would be taking names, and this list of voting records speaks for itself. President Trump wants to ensure that our foreign assistance dollars – the most generous in the world – always serve American interests, and we look forward to helping him see that the American people are no longer taken for granted,” said Haley.
According to the UN Voting Practices Report, the top 10 countries who are likely to vote with the US are:
The top 10 countries who are the least likely to vote with the US include: