SAA to get R5 billion bailout
The National Treasury has confirmed that South African Airways, SA Express, and the South African Post Office will receive further financial support, in its medium-term budget policy statement.
SAA will receive R5 billion through a special appropriation bill to settle debt redeeming between now and March 2019.
This will help prevent a call on the airline’s outstanding debt of R16.4 billion, which is guaranteed by government, Treasury said.
In addition, R1.2 billion has been allocated to South African Express Airways, while the South African Post Office will recieve R2.9 billion to reduce debt levels.
“It is expected that new boards at state-owned companies will ensure higher standards of governance and more effective use of public money,” Treasury said.
Other in-year allocations include:
- R800 million added to the school infrastructure backlogs grant to complete approved projects.
- R166 million added to the national health insurance (NHI) indirect grant (health facility revitalisation) component to procure medical equipment and to design a new academic hospital in Limpopo.
- R546 million reprioritised within the NHI indirect grant to address the critical shortage of medical professionals in the health sector, and to procure beds and linen for health facilities.
These allocations will be paid from a contingency reserve and unspent funds from other government departments, Treasury said.
In a separate section focusing on the risks associated with South Africa’s state-owned enterprises, Treasury said that SAA has a R19.1 billion government guarantee – R14.5 billion of which has been used.
SAA has R14.2 billion of repayments due by March.
“In 2018/19, government is allocating R5 billion to help the airline repay this debt,” it said.
“In general, SAA is not generating sufficient cash to repay its total debt and will have to negotiate with lenders to refinance or extend maturity dates.”
Battling state-owned enterprises
The national carrier is one of several state-owned companies that will struggle to refinance or redeem debt without government assistance at a time when access to credit is becoming more difficult due to weak balance sheets, poor governance and liquidity challenges, the Treasury said.
Contingent liabilities due to government guarantees for debt of state companies is a major risk to the fiscal path, it said.
According to a report by Bloomberg, state-owned firms have a combined debt load of R1.6 trillion, of which R670 billion is guaranteed by the government, according to the budget review.
Debt redemptions by the 10 biggest borrowers will average R66 billion annually in the next two fiscal years, more than government repayments due over the same period.
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