Cape Town - The plan to consolidate South African Airways (SAA) and SA Express and to find an equity partner is under way, Finance Minister Malusi Gigaba said in his maiden mini budget speech on Wednesday.
"After we meet the board of SAA, we will pronounce on our plans to consolidate aviation assets and bring in a strategic equity partner," he said.
A new board was appointed last week, including at least one person with aviation expertise.
"We believe a strategic equity partner can play an important role in SAA’s turnaround, as well as unlocking value for the fiscus, which has invested significantly in the airline over the years," Gigaba said.
During a press conference before the speech, he said: "The process of looking at an equity partner is underway to ensure we tap into private sector expertise to strengthen SAA management."
Gigaba thanked SAA’s lenders, specifically South Africa’s local banks, for the "understanding and patriotism they have shown, and the constructive role they continue to play in SAA’s turnaround".
"Despite its current challenges, government remains convinced that retaining a national carrier is in the public interest."
Government had issued a R19.1bn guarantee facility to SAA to ensure the company continues to operate as a going concern, the mini budget showed.
Total recapitalisation of R10bn would be provided in 2017/18. An amount of R5.2bn had already been provided, with the remaining R4.8bn to be transferred by March 31, 2018, the budget explained.
"These have been partially offset by use of the contingency reserve."
Treasury said that these funds would be used for working capital and to settle debt, enabling the airline to reduce its interest expenses. "Even after the capital allocation, government’s exposure to SAA debt remains significant at R15bn," it said.
Gigaba had proposed selling government’s full R13bn stake in Telkom, but revealed in his speech that they would probably only sell a portion of its stake.
"To ensure the expenditure ceiling is not breached, we have decided to dispose of a portion of government’s Telkom shares, with an option to buy them back at a later stage," he said in his mini budget speech.
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