Finance Minister to table his first mini-budget
October 23, 2017
Cape Town, South Africa: Finance Minister Malusi Gigaba will brief the nation on how South African Airways (SAA) will be funded when he tables his maiden Medium Term Budget Policy Statement (MTBPS) in Parliament on Wednesday.
The embattled national carrier has been struggling to pay its lenders and service providers.
The medium-term budget policy statement is normally an opportunity for the minister to make adjustments to the main budget requiring the approval of Parliament.
SAA was moved from the portfolio of Public Enterprises to National Treasury in 2014 and has been financially bailed out twice this year. At the end of September, National Treasury announced that government has had approved a R3 billion transfer to SAA to allow it to meet its debt obligations to Citibank.
The funds, which were also to be used to assist the airline with its immediate working capital requirements, were from the National Revenue Fund (NRF).
Gigaba replaced former finance minister Pravin Gordhan in a controversial Cabinet reshuffle by President Jacob Zuma in March this year. Gigaba had previously announced that government is exploring options of establishing a proper capital structure for the airline.
Public Finance Management Act
The R3 million bailout was done in terms of the Public Finance Management Act that states that the Minister of Finance can authorise the use of funds to defray expenditure of an exceptional nature, which is currently not provided for and which cannot be postponed to a future Parliamentary appropriation of funds.
At the time Treasury said that a default by the airline on the R3 billion would have triggered a call on the guarantee exposure totaling R16.4 billion, leading to an outflow from the NRF “and possibly resulting in elevated perceptions of risk related to the rest of SAA's guaranteed debt”.
Deputy President Cyril Ramaphosa has said an Inter-Ministerial Committee on State Owned Enterprises (SOEs) was looking into strengthening SOEs that need support, including SAA, in order to return to their profitability.
Last week six new members to SAA’s board were announced. The new board Chairperson Johannes Bhekumuzi (JB) Magwaza will take over from chair Dudu Miyeni. SAA has had five CEO’s in as many years under chairperson of the board, Miyeni.
SAA also announced network changes both for domestic and regional segments as part of its newly developed five-year plan that seeks to return the company to financial sustainability.
Gigaba indicated that the process of assessing the viability of a merger between SAA and SA Express is done, pending a government review. - Gigaba’s tabling of the MTBPS comes after Statistics South Africa’s announcement last month of the country’s emergence from a technical recession. In the second quarter of 2017, South Africa’s Gross Domestic Product (GDP) grew by 2.5%.
The Democratic Alliance (DA) said in a statement that they believed the minister should deal decisively with challenges to reverse economic decline.
It called for the reform the “zombie” state-owned SAA by putting the national airline into business rescue with a view to stabilizing and then privatizing it.
“What will define the success, or the failure, of the minister’s “maiden” medium-term budget policy statement will, in the end, be whether he can give hope to the 9.3 million people who do not have jobs, or have given up looking for jobs, in South Africa,” the statement said.