South Africa Considering Sale of State Assets to Fund AirlineBy and
Government needs to offset bailout of South African Airways
Move comes two years after sale of Vodacom stake to aid Eskom
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.
“Telkom cannot comment on shareholder related activities,” spokesman Gugulethu Maqetuka said in an emailed request for comment. The company’s shares fell 2.1 percent to 65.36 rand as of 12:00 p.m. in Johannesburg, valuing the operator at 34.4 billion rand.
SAA hasn’t made a profit since 2011 and has previously survived on 19.1 billion rand of state-backed guarantees. 18.6 billion rand of that has been used, according to Gigaba’s letter. The airline has been without a permanent chief executive officer since 2015 and the cabinet is considering Vodacom executive Vuyani Jarana for the role, a person familiar with the matter has said.
— With assistance by Arabile Gumede