GOVERNMENT GUARANTEES
HILARY JOFFE: State entities voracious termites in fiscus
Not long after the cabinet reshuffle in March, one of the foreign banks that had extended a line of credit to South African Airways (SAA) gave notice that it wanted to call in its loans. It was one of a group of foreign and local banks that advanced about R7bn in short-term credit to the airline, backed by government guarantees. Without the guarantees, now totalling almost R20bn, SAA would not be able to borrow to keep going, given that even its shareholder has described it as technically insolvent. Happily, the foreign bank was persuaded to leave its loan in place and so too were the others in the group, some of whom might also have called in their loans had the first bank done so. This is not the first time lenders to SA’s state-owned enterprises (SOEs) have moved to pull the plug in response to the SOEs’ growing financial woes, governance and management horrors and daily stories of corruption and capture. Asset manager Futuregrowth cut off new lending to five SOEs in 2016 and oth...
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