the g spot
DBSA’s Paul Currie on that SAA loan: ‘this is not a bailout’
The Development Bank of Southern Africa stunned the market with the news that it is to lend SAA R3.5bn. We asked chief investment officer Paul Currie how this squares with the bank’s development mandate
The Development Bank of Southern Africa (DBSA) stunned the market with the news that it is to lend SAA R3.5bn. We asked chief investment officer Paul Currie how this squares with the bank’s development mandate.
PC: The rationale for it was you need stability so that the business rescue practitioner (BRP) can complete the business rescue plan. It’s not in the public interest for SAA to collapse in flames. Does SAA need a relook? I’m not an aviation fundi ... but there is clearly a need for a reorganisation and there’s a much greater capacity to retain economic value in an orderly restructuring than a fire-sale collapse. We’re not opining on SAA’s viability or what the media calls a vanity project — it’s purely about stability in the financial sector.
This is not a bailout; it’s an equity bridge. The bank’s development mandate is quite broad in terms of economic value creation. We haven’t funded SAA before and there was a reason for that: the Treasury didn’t want us to, because it saw [SAA] as being fundable elsewhere. We typically don’t go into spaces where the commercial banks can fund.
How is this money getting into SAA?
PC: We can’t lend money to the National Treasury; the DBSA has to lend money to SAA via the BRP.
FM: If another airline came to you, would you lend to it?
PC: That’s not an easy question to answer because every transaction is looked at on its merits.
FM: Your chair is the ANC’s policy head Enoch Godongwana. How much political pressure was brought to bear on the DBSA?
PC: None. The first thing Enoch did was to step out of the meeting.
FM: So you can say, honestly, that this is independent of politics?
PC: Certainly I never saw any. I was in London [when] we were approached by the BRP, the deputy minister of finance and the Treasury director-general. Enoch handed over to the deputy chair and said: "You need to take this organisation through this decision".
I have to say it’s something that’s sacrosanct in the DBSA and I think it’s one of the reasons we’re still where we are: the board has not allowed itself to be subjected to pressure. I’ve been at this organisation for 10 years and there’s not been a single instance of directed lending. And I can comfortably say I do not believe this was directed lending.
Make no mistake, it wasn’t an easy decision.
FM: Well, what was difficult about it?
PC: It was always going to be a hiding to nothing in the public domain, but the last thing you want to do is damage the DBSA brand.
There are so many things we’re trying to put together to boost the economy, the last thing we can afford to do is trash the organisation. But by the same token you also don’t want to generate a situation where you create huge systemic risk, SAA goes into liquidation and all the guarantees get called. That affects everyone, the whole country.
FM: Do you expect to make a return?
PC: A very small one. We do charge for government risk here and this is fully government-guaranteed.
FM: Does this facility mean there’s money not lent elsewhere, where there is greater social need?
PC: I must say, the number of times people have said: How could you do it? This is not about keeping SAA in perpetuity, this is about [allowing] this business rescue process to proceed. Does this hamper us in our other projects? Absolutely not. The biggest challenge we have with projects in SA at the moment, given our anaemic growth, is that development finance institutions and commercial banks are looking for investments to make. That’s why I think the infrastructure fund and the blended finance platforms we’re putting together now are so important to drive that kind of reinvigoration of the economy. We haven’t turned anybody away and certainly not because of this [loan].
We’ve got a nearly R90bn balance sheet; it’s not something that skews the balance sheet.
FM: You must be acutely aware of the frustration South Africans feel, that nothing is being done to kick-start the economy.
PC: If you’d said the same thing to me a year ago I’d probably have agreed with you, but I do think — and it might not be transparent to the man on the street — there has been a lot of progress and focus on the infrastructure space on getting this moving.
Is it easy? No, it’s not: we have complex procurement processes in this country, we have decentralised planning, which is problematic, and we need to simplify these to programmatic infrastructure interventions to make it easier for municipalities to be able to develop projects.