Cape Town – Finance Minister Malusi Gigaba is discussing the option of selling government’s 39.75% stake in Telkom with three Cabinet ministers, his spokesperson Mayihlome Tshwete said on Wednesday.
The Cabinet ministers engaging with Gigaba are Economic Development Minister Ebrahim Patel, Public Enterprises Minister Lynne Brown and Telecommunications Minister Siyabonga Cwele, he said.
Tshwete said the statement by Democratic Alliance lawmaker Alf Lees in Parliament on Wednesday that he possessed a “secret” document revealing that Treasury had decided to sell government's R14.4bn stake in Telkom, was inaccurate.
“It is a confidential Cabinet memo that seeks to discuss the possibility of selling this stake as an option to recapitalising South African Airways (SAA),” he told Fin24.
“We shouldn’t speak of it as a done deal,” he said. “This is one of the things we are exploring. The alternative is for us to look for funding in other places, without imposing on other parts of government, as we want to make sure it does not have an adverse effect on the fiscus.”
Tshwete pointed to former finance minister Pravin Gordhan’s budget speech in February, in which he stated: “During the next few months, proposals for putting the capital structure of SAA … on a sound footing will need to be agreed. I hope that this can be dealt with in the Adjustments Budget later this year.”
Tshwete said it was not in the country’s best interest to raise the issue in the manner in which it was done in Parliament. “We have rating agencies watching us,” he said. “We should not create panic unnecessarily without explaining the context. We wish some things could get managed a bit better because there is no opposition when it comes to rating agencies.”
Furthermore, Gigaba's spokesperson said it was old news that SAA needed recapitalisation. He said that, while SAA wanted between R10bn and R15bn to remain a going concern, it may not get this amount.
“National Treasury may not share that view,” he said. “They may have to make do with a certain amount and to get that amount, they may have to fulfil certain obligations.”
SAA may need to merge with other aviation assets
One of the strategic moves Treasury could demand is the merging of aviation assets. “Minister Gigaba has wanted this to happen ever since he was public enterprises minister,” said Tshwete.
Furthermore, it was an objective raised in this year’s Budget Review, which stated: “During 2017/18, government will provide some financial support to SAA in a manner that does not increase the budget deficit.
“The support will strengthen the new board’s ability to effect a comprehensive turnaround strategy that allows SAA to function on a financially sustainable basis. Advisers are assisting government with a review of the state’s aviation assets.
“The review is expected to be completed by the end of March 2017. The goal is to develop a stronger, more efficient and sustainable state aviation sector. The possibility of merging SAA with South African Express, and introducing a strategic equity partner, will be considered.”
Lees said in a statement later on Wednesday that the only option left, “with any hope of plugging the financial hole, is for the ANC government to put SAA into business rescue to stabilise the airline before taking it to the market to find private equity investors”.
Earlier on Wednesday, Finance Deputy Minister Sfiso Buthelezi told Parliament’s standing committee on public accounts that Treasury has to recapitalise SAA.
“SAA is under capitalised,” he said. “That is a legacy problem. Treasury will assist with this. Treasury will never allow the airline to go under. We are saying that we don't want to privatise SAA. We have always allowed SAA to go and borrow, which is not solving the problem. When we give them guarantees, we tell them to go and borrow.”
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