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Cape Town – Government will not divert from its plan to recapitalise South African Airways (SAA), Finance Minister Malusi Gigaba said.
At a press briefing ahead of the Budget Speech on Wednesday, Gigaba told journalists government will stick to its allocation of R13bn to recapitalise the airline.
Contingent liabilities are capped at R11.77bn over the medium term, according to the budget review document.
“Any spending on SOEs (state-owned enterprises) will be done in a budget neutral way; we will need to find resources in the sale of assets to recapitalise SOEs,” Gigaba said.
During his address Gigaba noted changes at the state airline. Government has managed to appoint a new board and a permanent CEO at SAA and has also implemented a long-term turnaround strategy, he said.
Government will continue working with SAA’s new board and its lenders to strengthen the airline, according to the budget review.
Government is also working with the auditor general to finalise the national carrier’s 2016/17 financial statements. The airline lost R5.6bn in 2014/15 and R1.5bn in 2015/16.
SAA received a R3bn bailout from Treasury in 2017 to avoid defaulting on its loan from Citibank. A senior Parliamentary legal adviser had questioned the bailout, Fin24 reported.
The Financial and Fiscal Commission previously told Parliament that government guarantees for SOEs should not be taken for granted.
Addressing debt issues at SAA was one of the points in Finance Minister Malusi Gigaba’s 14-point plan to revive confidence in the economy. The airline appointed Vuyani Jarana, previously head of Vodacom’s enterprise division, as a permanent CEO.
The airline is also supposed to finalise a five-year turnaround plan by the end of December 2019, as outlined by the plan.
The airline met with domestic lenders in November 2017 to negotiate the refinancing of R6bn in outstanding loans, Bloomberg reported.
The banks had agreed to extend the loan terms, Jarana told Bloomberg.
Last year government bailed SAA out with more than R5bn, including a R2.2bn bailout Treasury granted the airline in June to prevent it defaulting on its loan from Standard Chartered.
During the briefing Gigaba added that SA Express will also be subject to review, as there are plans to consolidate government’s aviation assets.