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South Africa May Bail Out State Bank, Arms Company

South Africa May Bail Out State Bank, Arms Company

  • National airline also likely to receive funding in budget
  • South Africa’s state companies are straining national finances
Denel has been bailed out before it has struggled to pay salaries in recent months.

Denel has been bailed out before it has struggled to pay salaries in recent months.

Source: Denel

Denel has been bailed out before it has struggled to pay salaries in recent months.

Source: Denel

South Africa’s Treasury is likely to announce additional funding for the state arms company and a government-owned agricultural lender in this week’s budget, people familiar with the situation said.

Denel SOC Ltd., which makes attack helicopters and other weapons, will probably receive between 2 billion rand ($123 million) and 3 billion rand, the people said, asking not to be identified because the information hasn’t been made public. The Land and Agricultural Development Bank of South Africa will get 1.5 billion rand to 2 billion rand, the two people said. Both entities confirmed to Bloomberg that they are seeking money from the National Treasury.

The Treasury declined to comment, saying any announcements will be made when the medium-term budget policy statement is presented on Oct. 28.

South African Airways, the insolvent national airline that needs more than 10 billion rand to restart, is also likely to receive funds, the people said.

The bailouts will heighten concern about the stress South Africa’s state companies are putting on government finances, with the national power company also having received support. While Denel has been bailed out before it has struggled to pay salaries in recent months. The Land Bank received 3 billion rand in June as it couldn’t repay its debt.

The companies have been told to try and seek private equity partners for further funding, the people said.

Read more: Wealth Tax Among Mboweni’s Options to Fund South Africa’s Budget

The Land Bank has asked Treasury for 7 billion rand of support in the financial year ending in 2022 and 1 billion rand each year for the next three years, the institution said in a response to queries.

“Land Bank needs a combination of capital injection and state guarantees to support the bank’s fund raising,” it said.

— With assistance by Prinesha Naidoo