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SAA gets state funds to avoid default

Treasury says decision made to inspire confidence.

JOHANNESBURG – South African Airways (SAA) has been provided with state funds to help it repay loans of about 2.3 billion rand ($176 million) to Standard Chartered, the government said on Saturday.

The airline faced around nine billion rand of debt maturing at the end of June involving six or seven lenders, according to the Treasury.

On Thursday the Treasury told lawmakers it was in discussions with lenders to roll-over the nine billion owed to them.

In a statement issued on behalf of the Treasury, the government said the funds provided to SAA had been sourced from the National Revenue Fund (NRF), which under law allows any minister to authorise the use of funds for expenditure of an exceptional nature.

“A default by the airline would have triggered a call on the guarantee, leading to an outflow from the NRF and possibly resulting in elevated perceptions of risk related to the rest of SAA’s guaranteed debt, the statement said.

SAA already relies on government guarantees of about 20 billion rand to keep it solvent.

It has been cited by all three major rating agencies repeatedly as a threat to South Africa’s economy.

Two of those agencies cut the country’s debt to sub-investment grade following President Jacob Zuma’s firing of the finance minister in March.

Finance Minister Malusi Gigaba’s office said Standard Charted had requested immediate payment of the money owed but that the remaining lenders had indicated they were open to deferring the debt.

“Drawing on the NRF was a tough decision versus the worse one of defaulting. It was taken to reassure lenders that state firms and more importantly government won’t default,” ministry spokesman Mayihlome Tshwete said.

The Treasury is under pressure to keep recent pledges to cut spending and reform governance at state firms to fend off credit downgrades deeper into “junk”. Such downgrades would trigger a spike in already soaring borrowing costs on public debt of more than 2.2 trillion rand.

On Friday Finance Minister Gigaba, speaking at the opening of ruling Africa National Congress’s policy conference, unnerved markets when he said the country may need outside financial assistance.

Asked by Reuters if he was referring to the International Monetary Fund, Gigaba smiled and said “Any”.

The official opposition party, the Democratic Alliance, said Standard Chartered’s refusal to defer the debt showed it had no faith in the management of the state carrier and that it was also a blow to the credibility of the Treasury.

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This constant influence of gubment on business throws a horseshoe in the works of capitalism. It is an unfair advantage to S.A.A.and hurts the industries that are trying to compete with them. Let’s understand something-Socialism does NOT work! Communism does not work! But as this country is 10 – 15 years behind the world they have not figured it out yet.

It will be sooner rather than later that socialism will be held with the same contempt as communism.

The struggle back to commonsense however will have many setbacks….. the most recent is the British general election where the free lunchers’ swallowed Corbyn’s lies and fantasies so that they could get an even bigger free lunch.

One hopes that Trump in the US and May in the UK hold their nerve against socialism; the price is high though being the loss of an election. Therein lies the rub: democracy gone mad.

Amen! Finally, some sense!

A billion here, a billion there. Pretty soon you’re talkin’ bout real money……

State funds! The State doesn’t create funds it just allocates and spends tax proceeds and debt. Hence, this must be seen for what it is, a tax-payer bail-out.

It is inconceivable that SAA now owes R9b … the mind boggles at the determination to run a once successful company so comprehensively into the ground. MG!! How much more will be wasted on the pathetic ineptitude of management. The determination we show to applaud the incompeteant, reward the corrupt and promote the indifferent/unable is truely staggering … and tomorrow we will do so again.

it’s the african way- one must look prosperous.
drive a beemer and live in a shack, as long as the world thinks you are rich.

End of comments.

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