13 September 2017

South Africa: Talks Underway to Address SAA Debt

Deputy President Cyril Ramaphosa says any funds that are being considered to help address South African Airways (SAA) maturing debt will have to be appropriated through a special appropriations bill that will be introduced to Parliament.

He also said that SAA was in talks with its lenders in a bid to find ways to get an extension.

The Deputy President was responding to questions at the National Council of Provinces on Wednesday.

"[The] SAA debt of approximately R6.8 billion which matures on 30th September 2017 will be resolved through a two-pronged approach.

"Firstly, any funds being considered will have to be appropriated through the special appropriation Bill which will in part assist the airline's working capital and repay some of the maturing debt.

"SAA is also negotiating with its lenders to extend maturing debt beyond September 2017.

"The precise make-up of the quantum of extension of debt and repayment of part of SAA's maturing debt will be announced by the Minister of Finance and the SAA Board at an appropriate time," he said.

Meanwhile, the Deputy President said at this stage, there was no need to invoke Section 16 of the Public Finance Management Act to support SAA on the matter of monies owed to it by the Angolan government.

"The position is that the new government in Angola has indicated that it will settle this debt," he said.

IMC on SEOs looking into SAA challenges

Meanwhile, the Deputy President said an Inter-Ministerial Committee on SOEs was looking into strengthening SOEs that need support, including SAA, in order to return to their profitability.

He said the challenges faced by SAA were quite complex.

"SAA is a 100% owned state company and it is operating in a very difficult market. Airlines around the world are not your most profitable entities.

"The sector is a very competitive one and many have faced headwinds and difficulties in terms of becoming profitable and getting out of the difficult situations that they are in.

"Right now, SAA is right there facing headwinds and difficulties from an operational and profitability point of view. In the past, it operated well and made profits and right now, it is facing great difficulties and needs the bail outs that only the government can give it.

"From the IMC point of view, we have been looking at processes and policies that can enable our state owned enterprises to operate better.

"First thing that we looked at, which is covered by another question which I can address now, is how best the boards can operate and how best management can operate and how the financial stability of these entities can be upheld," he said.

The Deputy President said it was government's belief that once the boards of SOEs can be repositioned and empowered with good management, they can be run in a manner that they can be in a much better position.

"... this is precisely what we are doing right across the various state owned enterprises. Having set out the policy, we are also looking at how the balance sheets of these companies can be better managed and how the financing can be better structured so that they are not driven into bankruptcy," he said.

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