Will Telkom save SAA?

Finweek English Edition - - In Depth - By Mariam Isa

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

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