Government bails out South African Airways

The South African government has given the state carrier funds to help it repay loans of around 176 million US dollars to Standard Chartered.

South African Airways (SAA) had a debt of about nine billion rand maturing at the end of June involving about seven lenders, according to the national treasury.

On Thursday, the treasury told lawmakers it was in discussions with lenders to roll-over the nine billion owed to them, Reuters reports.

An employee vacuums the interior of an Airbus Group NV A340-600 aircraft during a live weight saving demonstration by South African Airways at O.R. Tambo International airport in Johannesburg, South Africa, on February 24, 2015.

In a statement issued on behalf of the Treasury, the government said the funds provided to SAA had been sourced from the National Revenue Fund (NRF), which under law allows any minister to authorize the use of funds for expenditure of an exceptional nature.

“A default by the airline would have triggered a call on the guarantee, leading to an outflow from the NRF and possibly resulting in elevated perceptions of risk related to the rest of SAA’s guaranteed debt, the statement said.

SAA already relies on government guarantees of about 20 billion rand to keep it solvent.

It has been cited by all three major rating agencies repeatedly as a threat to South Africa’s economy.

Two of those agencies cut the country’s debt to sub-investment grade following President Jacob Zuma’s firing of the finance minister in March.

(CGTN)