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South Africa considering sale of state assets to fund South African Airways

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Staff Writer | July 22, 2017
South African Airways
Africa   The bailout prevented SAA from defaulting

South Africa is evaluating assets it could sell to pay for this month’s 2.2 billion rand ($169.5 million) bailout of unprofitable carrier South African Airways, Finance Minister Malusi Gigaba said in letter to parliament.

The government’s decision to settle a debt owed by the airline to Standard Chartered Plc mustn’t affect the balance of this year’s budget, Gigaba said in the note to Baleka Mbete, speaker of the National Assembly.

Further details will be provided in October, he said. The plan was first reported by Business Day newspaper, which said a 39 percent stake in phone company Telkom SA SOC Ltd. was among the assets being considered for a disposal.

South Africa’s economic downturn, the downgrading of the country’s foreign-currency debt and a “rapid deterioration” of SAA’s cash flow triggered the need for “urgent action” regarding the airline, Gigaba said.

The bailout prevented SAA from defaulting on the loan, which would have led to cross defaults of almost 14.6 billion rand of other debt, he said.

A disposal of a state-owned shares in a company such as Telkom would echo a 2015 decision to sell a 28.7 billion-rand stake in wireless carrier Vodacom Group Ltd. to raise funds for state utility Eskom Holdings SOC Ltd., which was struggling financially amid a nationwide electricity shortage. The buyer in that case was the Public Investment Corp., Africa’s biggest money manager, which is also owned by the state.

The government’s stake in Telkom, South Africa’s biggest landline operator, is worth about 13.5 billion rand.


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