SAA gets bail-out for debts

DEFAULT LOOMS: GOVT STEPS IN

Finance Minister Malusi Gigaba has given embattled South African Airways (SAA) yet another bailout, the National Treasury confirmed. “Government has decided to transfer funds from the National Revenue Fund (NRF) to SAA to allow the airline to pay back its debt to Standard Chartered Bank, thereby avoiding a default,” Treasury said in a statement.

The payment was done in terms of section 16 of the Public Finance Management Act (PFMA).

“This section of legislation states that the minister can authorise the use of funds to defray expenditure of an exceptional nature which is currently not provided for and which cannot, without serious prejudice to the public interest, be postponed to a future parliamentary appropriation of funds.

“The due process laid out in the legislation will be followed,” it said.

A default by the airline would have triggered a call on the guarantee, leading to an outflow from the NRF and possibly resulting in “elevated perceptions of risk related to the rest of SAA’s guaranteed debt”.

Improving the financial positions of the airline through recapitalisation had been on government’s agenda “for a while”.

Several options were being explored and an update would be provided during the medium-term budget policy statement in October.

“Given the nature of the problems at SAA, section 16 of the PFMA had to be used as the last resort.

“Government will do everything in its power to ensure that the airline’s turnaround strategy is implemented.

“The airline remains a strategic asset and in its role as the flag carrier it serves as an economic enabler with direct and indirect benefits across a wide range of economic activity,” Treasury said. – ANA