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Govt takes over AirZim’s $300m debt

By Thomas Mupfuka

The government is expected to finalise the takeover of more than $300 million in debts owed to creditors by struggling national airline, Air Zimbabwe, by June.

Transport and Infrastructure Development minister Joel Biggie Matiza told Standardbusiness that government was moving ahead with the debt assumption plan following talks between him and Finance minister Mthuli Ncube.

“We have been working together with the minister of finance. we told ourselves that in order to speed up the process of turning around AirZim, we have to conclude this whole process in the next two months and we are going to stick to this timeframe,” he said.

Air Zimbabwe owes a combined US$341 million to foreign and domestic creditors as at August 31, 2018.

Last October, the national flag carrier was placed under reconstruction.

Matiza added that the firm was showing significant improvements under the leadership of administrator Reggie Saruchera.

“In terms of latest developments, I can say the company is showing signs of improvement and the administrator there is doing a wonderful job,” he said.

“In a short period we have seen him holding creditors’ meetings. I am told now that they are in the process of verifying who is owed what.”

However, Mike Murenzvi, an accountant in the transport sector, said Air Zimbabwe’s challenges were far from over even if its immense debt was passed onto the taxpayer.

“The national carrier has one older than usual, operational long-haul aircraft and owes critical aviation service providers, for example, the International Air Transport Association (IATA) and various civil aviation organisations, which raises the risk of the aircraft being grounded and/or impounded as a way to force settlement of specific debt.

“The assumption of debt by the state might not extinguish the lien over any aircraft owned by the airline,” he said.

“This is a question the investor will need an answer to, as it has very material impact on the potential transaction.

“The airline’s administrator, Saruchera, may have an answer of sorts to this given that he proposed the debt reconstruction plan.”

Murenzvi added: “In summary, the debt assumption by the State is bad for the fiscus and doesn’t offer full clarity to any investor.

“Liquidating the carrier and the state inheriting the residual debt since AirZim is covered under the State Liabilities Act might prove to be a better option.
“This will automatically free the skies for any interested players to ply local and regional routes.”

Last week the airline received delivery of a Embraer ERJ-145 jet.

Matiza added that government was now working on the modalities for the delivery of the long-haul Boeing 777 after making full payment of the planes.

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