PRETORIA — South Africa is evaluating assets it could sell to pay for this month’s R2,2 billion ($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% 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 R28,7 billion 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 R13,5 billion.
“Telkom cannot comment on shareholder related activities,” spokesman Gugulethu Maqetuka said in an emailed request for comment. The company’s shares fell 2,1% to R65,36 as of 12pm in Johannesburg, valuing the operator at R34,4 billion.
SAA hasn’t made a profit since 2011 and has previously survived on R19,1 billion of State-backed guarantees.
R18,6 billion 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. — Bloomberg