New, R5bn debt crisis looms for South African Airways
Conditions of banks' last extension that Treasury provide SAA with R3bn by end-September to repay Citi and provide working capital of R1.2bn
South African Airways (SAA) will face a new debt crisis at the end of October when the repayment of loans of R5bn made by domestic banks falls due on the last day of the month.
The Treasury has already bailed out SAA twice since June: first to repay a Standard & Chartered loan of R2.2bn and then to repay a Citibank loan of R1.76bn. Both had refused requests to roll over their loans to the airline.
The news that domestic funders have also set a deadline for repayment, subject to certain conditions, comes a day after it emerged that the Treasury has abandoned its plan to sell its R13bn stake in Telkom, which had been intended to fund SAA’s debt and capital requirements.
A question now hangs over how the funds for SAA will be sourced as the government has committed to assisting state-owned enterprises in a “deficit-neutral way”, which precludes the option of raising additional debt funding.
The details of the arrangements with domestic banks are contained in a report to Parliament by Finance Minister Malusi Gigaba, tabled in Parliament on Friday. The report is obligatory in order to comply with section 16 of the Public Finance Management Act, the provision under which Gigaba tapped into the National Revenue Fund in order to repay Standard & Chartered and Citi.
The report states that the R5bn from domestic banks fell due on September 29 but after discussions the lenders agreed to extend by one month to the end of October.
The conditions of the extension, states the report, was that the Treasury provide SAA with R3bn by the end of September to repay the Citi loan and to provide working capital of R1.2bn. On this basis, the banks would entertain “an additional extension” until the end of March 2018 “subject to the required equity injection into SAA being tabled during the medium-term budget policy statement and being approved by Parliament.”
The DA’s Alf Lees, who is the party’s deputy shadow minister of finance, said on Friday that the possibility of the appropriation being approved before the end of October when the loans come due, was zero.
“An appropriation bill must be prepared, the standing committee must hold public hearings. Parliament’s deadline to complete this process is November 29,” said Lees.
Lees said that either the banks would have to reschedule their loans again or they had already been assured by Gigaba that the bill would be rubber-stamped by Parliament.