Will Telkom save SAA?
selling a stake in Telkom to help bail out loss-making South African Airways (SAA) is back on the table, in order to avert a R3.7bn breach in the government’s spending ceiling in the financial year ending next March, Treasury’s Director General Dondo Mogajane said on 25 October.
The news came as a surprise as, just two weeks ago, Telkom had withdrawn its trading cautionary on the JSE, saying it was not aware of any current decision by the government to reduce its 39% shareholding in the company – despite stating that this was the case in September.
Mogajane told journalists ahead of the Treasury’s MediumTerm Budget Policy Statement in Parliament that by March next year a final decision will have been made on a list of assets the government will dispose of to cover allocations for SAA and the South African Post Office, which together amount to R13.7bn.
“It’s an option that remains at our disposal, but we won’t get rid of it just like that – maybe just a bit of it,” he said.
The decision wouldn’t be taken lightly as Telkom was a wellperforming asset providing the government with between R900m and R1bn in dividends every year, he added.
Mogajane added that Treasury would start engaging with the new SAA board to initiate the process of approving a strategic equity partner that could both bring in the capital to help fund the airline and private sector expertise.
SAA has posted losses for seven consecutive years, ratcheting up a cumulative total of R15bn over the past five years alone, and soaking up R24bn in government support during that period. It has already received R5.2bn of a R10bn recapitalisation promised by the government earlier this year, and Treasury officials had promised to make the rest of the bailout public in the medium-term budget.
But Mogajane said the plan would only be final in March next year. Treasury officials said privately on 25 October that government ministers were still wrangling over which state assets to dispose of – a strategy that was first mooted to help streamline struggling state-owned enterprises a few years ago.
Poor governance, corruption and inefficiency have plagued SOEs for years and the weight of their contingent liabilities on the Treasury’s balance sheet is one of the main threats to the country’s credit ratings.
“We are tired of being dragged into crises by those we employ to govern and manage state-owned companies. This must end,” Gigaba said in his speech to Parliament. “The trend of state-owned companies seeking bailouts to finance operational expenditure, inefficiency and waste must also be brought to an end.” ■
Dondo Mogajane Director General of the Treasury