Selling South African Airways Now Would Make Its Debt Payable- Ramaphosa
The President of South Africa said South African Airways (SAA) is so debt-laden that selling it now would make its debt payable. This was during a parliament session when the president as replying to a question.
SAA is is so debt-laden that selling it now would make its debt payable immediately and possibly collapse the fiscus, President Cyril Ramaphosa said on Tuesday. https://t.co/2Cq2h0Asrk
— Mail & Guardian (@mailandguardian) November 6, 2018
President Cyril Ramaphosa said on Tuesday 6 November 2018 that SAA should be sold immediately and possibly collapse the fiscus,
Democratic Alliance leader Mmusi Maimane had asked the president’s position on the troubled airline, as it appeared that Finance Minister Tito Mboweni and Public Enterprise Minister Pravin Gordhan had different viewpoints on SAA’s future.
Mr Mboweni has been vocal about privatizing state-owned enterprises. During his mini-budget said there are “no holy cows”, while Gordhan has tasked SAA’s board notice to stabilize the airline’s finances among other things.
President Ramaphosa said he knows that Maimane’s stance is to close down the airline, but that course of action is problematic. He explained that
Here is the reality SAA is laden with debt right now, as we speak, it is laden with debt for a whole number of reasons …If you were to say today sell SAA, we would not be able to get any value for it.
The debt SAA carries is significant and underwritten by government.
“If we shut it down it means the debt of SAA becomes payable immediately. Immediate payment of that debt has an impact on debt carried by all other state-owned enterprises and that can collapse the fiscus.”
The future of the airline is linked to how it is stabilised, the president said. One way to do that is to get a strategic equity partner to help take the airline forward. Rather than shutting down the airline, Ramaphosa said it is important to first stabilise the airline. Treasury has allocated R5-billion to SAA to stabilise its debt, R14.2-billion of the airline’s debt falls due in March 2019. — Fin24