{"id":183469,"date":"2017-07-04T11:56:42","date_gmt":"2017-07-04T09:56:42","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=183469"},"modified":"2017-07-04T15:46:53","modified_gmt":"2017-07-04T13:46:53","slug":"saa-bailout-is-a-black-mark-against-sas-economy-fitch-warns","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/183469\/saa-bailout-is-a-black-mark-against-sas-economy-fitch-warns\/","title":{"rendered":"SAA bailout is a black mark against SA’s economy, Fitch warns"},"content":{"rendered":"

Ratings firm Fitch has issued its second warning in as many weeks, saying South Africa is putting itself at risk of further economic decline by mismanaging its SOEs.<\/p>\n

The warnings comes after the South African government bailed out South African Airways with an emergency payment of R2.2 billion – another in a long line of bailouts at the failing airline.<\/p>\n

Fitch, and other ratings agencies, has long pointed to problems at South Africa’s state-owned companies as one of the weakest points in the economy.<\/p>\n

According to Fitch, the risk SOEs pose to South Africa’s sovereign are not theoretical, they are very real.<\/p>\n

“Eskom needed a cash injection in 2015. And SAA now needs government support. The fiscal risks are heightened by expected weakening of SOE governance.<\/p>\n

“Existing SOE liabilities are more likely to land on the government\u2019s balance sheet. And the stock of liabilities will rise faster than expected,” the group said<\/a>.<\/p>\n

Economists say that the latest bailout could put South Africa on watch for yet another downgrade – with the threat of a Moody’s downgrade pushing the country into full junk status.<\/p>\n

Previously, it was former finance minister Pravin Gordhan’s hard-line opposition to unconditional bailouts that kept ratings firms at bay – but once he was fired by president Jacob Zuma in March 2017, prospects for controlled state spending at SOEs were dimmed, and the ratings downgrades followed.<\/p>\n

Finance minister Malusi Gigaba said that the SAA bailout was urgently needed, and would not impact the fiscus as it was drawn from the country’s National Revenue Fund – an emergency pool of cash that’s reserved for exceptional situations.<\/p>\n

However, the minister has faced criticism for giving SAA a ‘free ride’, by signing off on the bailout without attaching strict conditions – like getting rid of defiant SAA chaiar, Dudu Myeni, who has overseen multi-billion rand losses at the airline during her tenure.<\/p>\n

SAA posted a R1.9 billion loss for its 2015 financial year, following a R1.5 billion loss in the year prior. Early reports point to a loss of as much as R4.5 billion in the 2016 financial year.<\/p>\n

Fitch, along with Moody’s and S&P Global previously issued a warning to South Africa in late June, following the released of the updated mining charter in the country.<\/p>\n

The groups said that the government’s move to force mining companies to ramp up BEE owenrship to 30%, while only allowing prospecting rights to groups with 50%+1% BEE owenrship, was an investor-unfriendly move.<\/p>\n

Fitch said that it was clear that the South African government was placing its \u201cradical economic transformation\u201d agenda ahead of the country\u2019s growth.<\/p>\n

“Uncertainty about final outcomes, the implications on returns for existing shareholders of the new provisions, and the challenges of meeting procurement targets will continue to constrain investment in the mining sector, which accounts for about 7% of GDP,” it said.<\/p>\n

South Africa’s already low growth prospects for 2017 have already been cut by global banks and investment groups to around 0.5%, with the South African government admitting that it is unlikely to hit the targeted 1.1% GDP growth target for this year.<\/p>\n

\n

Read:\u00a0South Africa is scaring investors away, ratings firms warn<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Ratings firm Fitch has issued its second warning in as many weeks, saying South Africa is putting itself at risk of further economic decline by mismanaging its SOEs.<\/p>\n","protected":false},"author":10,"featured_media":60423,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872,11121],"tags":[25,2510],"class_list":["post-183469","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-finance","tag-active","tag-fitch"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/183469","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=183469"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/183469\/revisions"}],"predecessor-version":[{"id":183597,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/183469\/revisions\/183597"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/60423"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=183469"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=183469"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=183469"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}