Govt throws SAA new R5bn lifeline

SOE FINANCES: ‘DEBT IS USED TO REPAY DEBT’

Sanral gets R3 billion to assist with its shortfall – but no extra funds for Eskom.

Sanral gets R3 billion to assist with its shortfall. No extra funds for Eskom.

Government has allocated R5 billion in the Medium-Term Budget Policy Statement (MTBPS) to help the struggling SA Airways (SAA) face a looming debt crisis in 2019.

The airline currently has R19.1 billion in government guarantees, of which R14.5 billion has been used and in March R14.2 billion of this will be maturing.

Government says the new allocation is to help SAA repay this debt. “In general, SAA is not generating sufficient cash to repay its total debt and will have to negotiate with lenders to refinance or extend maturity dates.”

Other state-owned companies (SOCs) thrown a lifeline in the MTBPS are SA Express, that got R1.2 billion, SA Post Office R2.9 billion to reduce debt and the SA National Roads Agency (Sanral) R3 billion.

According to the MTBPS, Sanral currently has government guarantees of R38.9 billion. It states there’s a risk that this guarantee might be called, as the agency isn’t generating enough cash from e-tolls to pay its debt as it falls due over the next three years.

Government has therefore agreed to allow Sanral to transfer R1.75 billion from its non-toll portfolio to its toll portfolio, allocating an additional R3 billion to make up the shortfall.

Government says while the pressure on Eskom’s liquidity has eased somewhat, its “weak financial position remains a risk that could lead to a call on guarantees.” There’s no provision for additional funds for Eskom.

Denel has used R2.8 billion of a five-year R3.4 billion guarantee and “will struggle to settle maturing debt on its own because its financial position remains weak.” No extra funds are however allocated to assist it. Government says Denel will consider selling non-core assets to improve liquidity while it implements a turnaround plan.

The Road Accident Fund’s (RAF’s) liability is seen growing from R206 billion to R393 billion by 2021/22, despite a 30c/l increase in the fuel levy for its benefit. Government says the RAF “will require further large increases to the fuel levy in each of the next three years”.

Guarantees issued by government total R670 billion; Eskom has the largest of R350 billion. At end June the total guarantees used by SOCs was R334.1 billion. Over the next three financial years, guaranteed debt redemptions should average R26 billion. According to the MTBPS, SOCs struggle to get funding, due to “weak balance sheets, poor corporate governance and liquidity challenges.”

They’ll find it difficult to refinance maturing debt, as investors increasingly require guarantees before providing financing. As such, government’s contingent liability exposure is likely to remain high.

Over the previous seven years, interest-bearing debt of the ten SOCs that borrow the most has grown 163% to R702.7 billion.

“This debt is expected to increase to more than R1 trillion over the medium term. Although the increase in debt has largely financed capital expenditure, a growing proportion is now financing operations and interest payments.”

Denel will consider selling non-core assets