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No SAA bailout announcement till mini budget - Gigaba

Aug 04 2017 12:21
Liesl Peyper

Cape Town – Finance Minister Malusi Gigaba said on Friday that he won’t make any announcement about a cash injection for struggling national airline South African Airways (SAA), but will wait for the mini budget in October.

Gigaba was expected to divulge the amount National Treasury would provide to SAA during a meeting with Parliament’s finance committee on Friday.

SAA is under severe financial strain with a cash shortfall of over R500m and losses amounting to close to R1.5bn for the year to date.

In addition, a number of SAA’s loans are maturing at the end of September this year, totalling R6.7bn.

“I’m not making an announcement now,” Gigaba said on Friday. “The [process] of the medium-term budget policy statement needs to be respected and I need to follow the right process. But don’t worry, we’ll come back and brief you about what we’re proposing and how to move forward.”

Responding to a question from the Democratic Alliance’s Alf Lees about SAA’s R2.2bn bailout at the beginning of July, Gigaba acknowledged that it was not the “best option” government would have wanted.

National Treasury invoked Section 16 of the Public Finance Management Act on July 1, giving SAA a R2.2bn lifeline to repay its loan to Standard Chartered Bank which had withdrawn its loan facility to the airline.

We [National Treasury] found ourselves in such a situation that we had to invoke this decision. The risk of triggering a domino effect with regard to other debts SAA has and other state-owned entities (SOEs) was quite high. And the risk would remained heightened, as there is low confidence among investors on how we’re managing our SOEs.”

Gigaba said for this same reason it was paramount that Eskom put its chief financial officer Anoj Singh on special leave to appease the Development Bank of Southern Africa, which had threatened to withdraw its loan facility unless action was taken against Singh.

“If Eskom didn’t do this, the other Class One lenders would have also been triggered to recall their loans and this could have plunged us into a financial crisis,” he said.

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