PARLIAMENT, October 25 (ANA) – South African Airways (SAA) will receive a further R4.8 billion from the state’s coffers in the current financial year, Finance Minister Malusi Gigaba confirmed in his first medium-term budget policy statement on Wednesday, with the money coming in part from the disposal of a portion of the state’s Telkom shares.
Gigaba said government would have the option to buy back the shares at a later stage but was going ahead with the sale to recapitalise the airline to prevent it defaulting on debt payments on government guaranteed loans.
“Government is disposing of a portion of its Telkom shares to avoid a breach, with an option to buy them back at a later stage.”
He added that government was losing tolerance with bailing out state-owned enterprises.
“As the shareholder, we are tired of being dragged into crises by those who we employ to govern and manage state-owned companies. This must end,” he warned.
“The trend of SOCs seeking bailouts to finance operational expenditure, inefficiency and waste must also be brought to an end.”
According to the MTBPS, the additional funds allocated to SAA will be used for working capital and to settle debt.
SAA holds a R19.1 billion government guarantee facility to allow it to remain in operation, and received R3 billion from the National Revenue Fund at the beginning of the month to allow it to repay its debt to Citibank.
Earlier in the year, it was given R2.2 billion to meet its debt payments to Standard Chartered Bank. With the further allocation confirmed on Wednesday, it brings its total bailout funds from the state for the year to R10 billion.
“Total recapitalisation of R10 billion will be provided in 2017/18.”
Gigaba noted that even after the capital injection, and the repayment of a portion of its debt, government’s exposure to SAA debt remains significant at R15 billion.
“There is a risk that if SAA’s financial fortunes do not improve, there will be further calls on the remaining guarantee.”
Gigaba is seen as having worked hard behind the scenes to clinch the removal of controversial SAA board chairwoman Dudu Myeni, which was announced last week.
He is planning to meet with the incoming board in November and said he would then move ahead with plans to bring in a strategic equity partner for the airline, which has been losing an average R3 billion a year since 2012.
“We believe a strategic equity partner can play an important role in SAA’s turnaround, as well as unlocking value for the fiscus which has invested significantly in the airline over the years.”
Gigaba also signalled that government would review its government guarantee framework to make it more “stringent”.
Eskom holds the bulk of government guarantees, and is using R218 billion of the R350 billion available to it.
Gigaba signalled deep concern over the mismanagement of the power utility and said three steps would be taken to counter it.
Firstly, a new board would be appointed by the end of November, a “credible” executive management team would be put in place and National Treasury would make sure that the company abides by the Public Finance Management Act and accounts for irregular expenditure.
Gigaba said Eskom had in its current state “become a significant risk to the entire economy”.
He reiterated that government viewed both the airline and the power company as critical assets but said they needed to show dramatic improvements in operations and governance.
– African News Agency (ANA)
