More state funds for SAA’s R9bn im­me­di­ate debt re­pay­ment

The Star Early Edition - - BUSINESS REPORT -

SAA HAS been pro­vided with state funds to help it re­pay loans of about R2.3 bil­lion to Stan­dard Char­tered, the govern­ment said on Satur­day.

The air­line faced about R9bn of debt ma­tur­ing at the end of June in­volv­ing six or seven lenders, ac­cord­ing to the Trea­sury.

On Thurs­day the Trea­sury told leg­is­la­tors it was in dis­cus­sions with lenders to roll-over the R9bn owed to them.

In a state­ment is­sued on be­half of the Trea­sury, the govern­ment said that the funds pro­vided to SAA had been sourced from the Na­tional Rev­enue Fund (NRF), which un­der law al­lows any min­is­ter to au­tho­rise the use of funds for ex­pen­di­ture of an ex­cep­tional na­ture.

“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, the state­ment said.

SAA al­ready re­lies on govern­ment guar­an­tees of about R20bn to keep it sol­vent. It has been cited by all three ma­jor rat­ing agen­cies re­peat­edly as a threat to South Africa’s econ­omy.

Two of those agen­cies cut the coun­try’s debt to sub-in­vest­ment grade fol­low­ing Pres­i­dent Ja­cob Zuma’s fir­ing of the fi­nance min­is­ter in March.

Fi­nance Min­is­ter Malusi Gi­gaba’s of­fice said Stan­dard Charted had re­quested im­me­di­ate pay­ment of the money owed, but that the re­main­ing lenders had in­di­cated they were open to de­fer­ring the debt.

“Draw­ing on the NRF was a tough de­ci­sion ver­sus the worse one of de­fault­ing. It was taken to re­as­sure lenders that state firms and more im­por­tantly the govern­ment won’t de­fault,” min­istry spokesper­son May­ihlome Tsh­wete said.

The Trea­sury is un­der pres­sure to keep re­cent pledges to cut spend­ing and re­form gov­er­nance at state firms to fend off credit down­grades deeper into “junk”. Such down­grades would trig­ger a spike in al­ready soar­ing bor­row­ing costs on pub­lic debt of more than R2.2 tril­lion.

On Fri­day Fi­nance Min­is­ter Gi­gaba, speak­ing at the open­ing of the ANC’s pol­icy con­fer­ence, un­nerved mar­kets when he said the coun­try may need out­side fi­nan­cial as­sis­tance.

The DA said Stan­dard Char­tered’s re­fusal to de­fer the debt showed it had no faith in the man­age­ment of the state car­rier and that it was also a blow to the cred­i­bil­ity of the Trea­sury.

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