National Treasury has signed-off an almost R24-billion impairment for government’s investment in South African Airways. It’s a stark increase from the R13-billion last year.
South African Airways
In a note to its financial statements for 2017/2018 released on Tuesday, the Treasury said the impairment value had risen because of the R10bn paid to SAA in the last fiscal year.
“While the appointment of a new CEO and a strengthened and credible board are good signals for the market in terms of sound corporate governance,” SAA had indicated it would report net losses for the next three fiscal years through 2020, the Treasury said in its annual report tabled in parliament.
The airline, one of a number of state-owned enterprises that are desperate for cash injections from the government, has asked the government for another R21.4bn bailout over the next three years to implement its latest turnaround strategy.
In contrast, privately run Comair, which competes with SAA, last week reported the highest after-tax profit of its history.
Alf Lees, the DA’s deputy finance spokesperson, said the impairment provision “is an indication of Treasury’s lack of confidence in ever being able to retrieve any of the money invested in the airline.
“It is a precursor to even more money being put in.”
SAA relies on R19.1bn in guarantees from the state, which enables it to borrow from commercial banks.
At the end of the 2017/2018 fiscal year, total government guarantees to state-owned entities amounted to R432bn, with electricity utility Eskom claiming R221bn.
Cleaning up the companies, whose dependence on state guarantees is viewed by credit ratings agencies as among the greatest risks to SA’s economy, is one of the greatest challenges faced by Cyril Ramaphosa since he became president.
While public enterprises minister Pravin Gordhan has made some progress improving governance and appointing new boards, returning state-owned entities to financial health is far from assured and talks with banks are ongoing.
Public Enterprises Minister, Pravin Gordhan also notified Parliament that the tabling of statements for 2017-2018 will be delayed.
He said SAA, SA Express and Denel will not table statements at the end of this month, as required by the Public Finance Management Act.