S. African gov’t defies criticism to bailout debt-ridden national carri*er
CAPE TOWN, Oct. 3 — In defiance of mounting criticism, the
Finance Ministry last Friday announced a plan to bail out debt-ridden South
African Airways (SAA) to the tune of at least three billion rand (about 222
million U.S. dollars).
This brings the SAA bailout for the year to 5.2 billion rand (about 385
million dollars). “Government has approved the transfer of funds from the
National Revenue Fund to SAA to allow the airline to address the debt
obligations to Citibank, thereby avoiding a default,” the ministry said in
a statement. Funds will also be used to assist SAA with its immediate
working capital requirements, said the statement.
Improving the financial positions of the airline through recapitalization
has been on the government’s agenda for a while. “The airline remains a
strategic asset and in its role as the flag carrier, it serves as an
economic enabler with direct and indirect benefits across a wide range of
economic activity,” the Finance Ministry said. The government has
appointed Vuyani Jarana as permanent Chief Executive Officer for SAA, and
he will commence his role on November 1 this year.
Jarana’s appointment marks a critical step in ensuring that the airline’s
turnaround strategy is implemented, the ministry said. The opposition
Democratic Alliance (DA) said it is disappointed, but not surprised, that
Finance Minister Malusi Gigaba, and the entire Executive resorted to once
again raiding the National Revenue Fund to settle part of SAA’s debt.
“Whilst the latest lifeboat will keep the wolves at bay, it will not deal
decisively with the funding crisis at SAA, as the airline is currently
incurring 350 million rand (about 26 million dollars) in losses every
month,” DA Shadown Deputy Minister of Finance Alf Lees said.
The DA urged Gigaba to urgently come clean on how the cabinet proposes to
deal decisively with SAA’s funding crisis. Given the continued uncertainty
over the airline’s ability to repay the loans, the banks would have
required onerous conditions to be met by the airline and the government,
the DA said. This massive and wasteful bailout will take even more money
away from rescuing the economy for the 9.3 million unemployed South
Africans, the DA claimed. Gigaba must take full responsibility for getting
himself and South Africa into this mess by failing to be transparent and
decisive over the issues plaguing the airline, said the party. The DA
warned that with increased borrowing cost for SAA, further rating
downgrades will be inevitable for the government and state-owned
enterprises. – XINHUA