South African Airways may get R10bn government infusion

September 18, 2017: To keep the state-owned carrier, South African Airways afloat, the Treasury is planning to infuse R10bn.This capital infusion will happen only after passing a special appropriation bill for the said amount in the Parliament reports newspapers. The bill will be introduced before the end of the month and provide South African Airways (SAA) with the necessary capital to continue operating and repay loans to lenders says Treasury director-general Dondo Mogajane said.

As the Parliament is in recess for two weeks, the urgent funding requirement will call for a special sitting. Mogajane said, “The Treasury would appeal a special session, given the urgency of the situation.”

During a meeting of Parliament's standing committee on finance, it emerged that SAA will need R2.4bn in working capital until end-March 2018. Treasury also needs to regularise the payment of R2.2bn that it made to pay out Standard Chartered Bank when the bank refused to roll over its loan to SAA in June.

An additional amount might be required before end September to repay part of the R6.8bn in loans which mature at the end of September.

Citibank has indicated previously that it does not want to roll over its R1.8bn loan, but Mogajane told MPs that negotiations with the bank and other lenders were continuing to get the loans extended. Citibank could agree to take a part payment and roll over part of the loan. He said some lenders were willing to roll over their loans, but others wanted to be paid.

Mogajane warned of the danger of SAA defaulting on any of its loans, as this would trigger cross-defaults for the loans to other state-owned enterprises which would also have to be paid.

An urgent special appropriations bill will be required as a short-term measure ahead of the additional appropriations made in the medium term budget policy statement, which will be tabled by finance minister Malusi Gigaba on October 25. After that, the appropriations bill will have to be adopted by Parliament.

Chief financial officer Phumeza Nhantsi said SAA was trying to negotiate an extension of the R6.8bn loans due by the end of the month for a further 18 months.

Treasury is also considering a request by the SABC for a guarantee of R3bn, the committee heard. Granting the guarantee would raise total state guarantees, which stand at R474bn, up from last year's R470bn.

Government's contingent liabilities in the form of guarantees are of concern to credit rating agencies, particularly because of the precarious state of several state-owned enterprises.

Source: BDpro