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UPDATE 1-South Africa's cabinet to make final decision on SAA by end Sept - Gigaba
August 25, 2017 / 1:02 PM / 25 days ago

UPDATE 1-South Africa's cabinet to make final decision on SAA by end Sept - Gigaba

(Adds Gigaba, Mabuza quotes, details)

By Olivia Kumwenda-Mtambo

PRETORIA, Aug 25 (Reuters) - South Africa’s cabinet will make a final decision on how to recapitalise state airline South African Airways (SAA) by end September, Finance Minister Malusi Gigaba said on Friday.

The airline runs one of Africa’s biggest fleets but is loss-making. It received state funds in July to help to repay debts and also depends on government debt guarantees of about 20 billion rand ($1.5 billion).

“Before the end of September, we should have gone to cabinet, proposed the options and cabinet should have taken the decision,” Gigaba told reporters after meeting business leaders.

“What is a fact is that there is a 10 billion rand capitalisation that is required for South African Airways but the source or model of that recapitalisation is not yet finalised.”

Gigaba said the other options include a share equity, public-private partnerships and “a full share swap in regard to the Telkom shares.”

South Africa is considering selling its stake in landline provider Telkom to fund SAA’s 10 billion rand bailout. The government holds a stake of about 39 percent in Telkom.

Telkom Chairman Jabu Mabuza said talk of disposing of the government’s shares in the company should not be discussed recklessly as the discussions could impact its shares.

“We have a duty being a listed entity to encourage and urge our shareholders, particularly those like the government that hold such a big chunk of our stocks, to always be mindful of their pronouncements publicly about their intentions, about their shares, that could be price sensitive,” said Mabuza.

Credit ratings agencies say SAA should be reformed and cite the cost of propping it up as a threat to South Africa’s credit rating. S&P Global Ratings and Fitch have downgraded South Africa’s credit to “junk” status. ($1 = 13.1790 rand) (Writing by Nqobile Dludla; Editing by James Macharia and David Evans)

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