The world is changing fast and to keep up you need local knowledge with global context.
The following adjustments were announced on Wednesday: R23 billion to Eskom; R6.5 billion to South African Airways (SAA) for settling its guaranteed debt and interest and an additional R10.5 billion is allocated to SAA to implement its business rescue plan; R84.7 million to the Independent Communications Authority of South Africa for the licensing of high-demand spectrum. – Editor
South Africa bails out insolvent state airline with $641 million – R10.5bn
By Paul Vecchiatto
(Bloomberg) — South African Finance Minister Tito Mboweni allocated 10.5 billion rand ($641 million) for the grounded state-owned airline to implement its rescue plan, taking money from other government departments.
Mboweni made the announcement in Wednesday’s medium-term budget policy statement, ending a long personal resistance to funding further bailouts. The support adds to the 16.4 billion rand the Treasury set aside over three years in February for South African Airways to repay its guaranteed debt and cover debt-service costs.
Why are some of these MPs clapping at the fact that the LandBank is broke & an additional R10.5Bn is going to SAA?
This R10.5Bn is in addition to the R16Bn that was made available at the #MTBPS2019
How many SMMEs could you support with that money? How many jobs?
— VT (@VusiThembekwayo) October 28, 2020
South Africa’s cabinet made the decision to fund the business-rescue plan and has not attached conditions, Treasury officials said in a lockup session before the budget presentation.
SAA was placed in administration in December, hasn’t made a profit in almost a decade and has long relied on state support. Keeping it afloat is seen by opposition parties and some analysts as an expensive distraction for the government at a time when it needs to rescue the more crucial state power utility and reinvigorate economic growth.
“R10.5 billion is allocated to SAA,” says Mboweni. This is fiscal treason against taxpayers and the millions of suffering citizens of South Africa.
— Leon Schreiber (@Leon_Schreib) October 28, 2020
State-owned companies continue to present significant risks in the form of contingent liabilities and direct requests for state support, the Treasury said in the budget statement.
Other companies highlighted as risks include:
- Airports Company of South Africa, which doesn’t have sufficient funds for its operational requirements
- Eskom Holdings SOC Ltd., which has used up 320 billion rand of its 350 billion rand in government debt guarantees. Financial support for the utility is reduced by 4.2 billion rand over the medium term
- The Road Accident Fund is the government’s largest contingent liability and its accumulated deficit is seen growing to 593 billion rand by 2022-23
- The Land Bank started paying overdue interest from August, after first defaulting on debt in April. It was allocated 3 billion rand in June and has approached the government for additional financial support.
- The South African National Roads Agency Ltd.’s revenue shortfall will cost the fiscus an additional 300 million rand in 2020-21.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.