Government could give up majority stake in Telkom to save SAA

Finance Minister Malusi Gigaba has revealed the need to sell state assets in a bid to inject nearly R16bn into South African Airways (SAA) so it can repay loans.

Following Treasury’s R2.207bn bailout of SAA in June, Gigaba had to inform Parliament about where the money would come from. This occurred on Thursday, when he wrote to Speaker of the House of Parliament Baleka Mbete.

In his letter, he revealed that SAA has to pay lenders R15.963bn in 2017. The R2.207bn bailout was a part of this total amount, which was given to SAA to settle its debt with Standard Chartered Bank through an emergency guarantee on June 30. That leaves another R13.755bn that must still be paid, with cash SAA does not have.

This is because Gigaba revealed SAA has already used R18.624bn of its R19.144bn government guarantee allocation. This means government has to find the above cash elsewhere for the state-owned airline that is bleeding R370m of losses every month. In other words, it has no choice, but to sell its own assets to fund the shortfall.

In his letter, Gigaba revealed that “government is currently identifying assets for disposal to offset the expenditure incurred and render the operation neutral in respect of the current year’s budget balance”.

Details of this asset disposal will be made in his mini budget in October, he said.

Those assets could likely come from the R14bn stake that the state-owned Public Investment Corporation (PIC) has in Telkom, Democratic Alliance MP Alf Lees said on Friday.

“The question is what highly liquid assets does the government have access to that it can sell at short notice,” Lees said. “One such asset are the shares that the state holds in Telkom that are estimated to be valued at R14bn.

“A fire sale of these Telkom shares would likely result in a significant discount and thus on their own will not meet the full cost of recapitalising SAA,” he said. “Thus other assets will have to be sold, even if the asset sales are spread out in order to minimise discounts.”

Explaining why he believes Gigaba will have to sell almost R16bn worth of assets, Lees said that to recapitalise SAA, Treasury will require that the full balance of the government guaranteed loans amounting to R13.755bn be repaid.

“The total bailout of SAA that is likely to be announced in the October 2017 adjustments budget will amount to R15.963bn and not only the R2.207bn already paid to Standard Chartered Bank,” he said.

Gigaba said the practise of selling assets to fund state-owned entities without offsetting the budget occurred before, when government sold PIC’s R23bn stake in Vodacom to give Eskom a bailout in 2015.

“The disposal of assets to offset the capitalisation of SAA would occur prior to the introduction of the adjustment appropriation (which occurs at the mini budget), as was practised in respect of the capitalisation of Eskom in 2015,” Gigaba wrote.

However, Lees is concerned that no conditions on SAA were given for the latest bailout.

“It is inconceivable that in his report to parliament, Minister Gigaba makes no mention of any conditions that were attached to the R2.207bn bailout of SAA,” he said.

“Despite the DA having requested details of conditions imposed on SAA none have been made known.

“The conclusion must therefore be that no conditions were imposed and that SAA is simply going to be allowed to continue making massive losses and to rely on taxpayer bailouts to avoid liquidation.”


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Government could give up majority stake in Telkom to save SAA