South Africa’s biggest banks had extended loans and bonds in struggling state-owned enterprises (SOE) totaling R54.6 billion ($4 billion) by end September, according to central bank data.
Power utility Eskom Holdings SOC Ltd. and South African Airways are among flailing government entities indebted to banks.
While the money invested is about 1.3% of each lenders’ total assets, the amount at risk is also equivalent to almost 80% of the lenders’ average annual net income.
These losses are expected to extend further however, as a number of state-owned enterprises are expected to post further losses. On Wednesday, Chief financial officer at SAA, Phumeza Nhantsi, said that losses at the airline are set to widen to R4 billion ($292.86 million) in 2017/18 – up from a previous estimate of R2.8 billion.
Last week, SAA said even with a government injection of R10 billion, the struggling airline will remain under-capitalised with a negative equity position of over R9 billion. Vuyani Jarana, SAA’s CEO, said the airline had outstanding debt of R13.8 billion($1.01 billion) as of this month and that it needed to pay back domestic lenders and U.S. bank Citi R4 billion by March 2018.
Eskom confirmed earlier in November that it is also currently facing a cash reserve crisis, saying it requires R20 billion to remain operational.
Further reporting by Bloomberg.