Advisers to be appointed to explore options for SAA shareholding

PUBLISHED: Wed, 26 Oct 2016 11:43:34 GMT

Government plans to appoint advisers to provide it with technical assistance with regards to its holdings in South African Airways (SAA) and SA Express as it considers the possible realignment of its airline shareholdings.

According to Treasury officials CNBC Africa spoke to, options being considered include a potential merger between the two airlines or finding a strategic partner for them. 

On Wednesday the Medium Term Budget Policy Statement (MTBPS) revealed that several state-owned entities (SOEs) pose risks to the public finances of the country. It signalled out SAA, the South African Post Office (SAPO), the South African National Roads Agency Limited (SANRAL) and Eskom, all of which, it states, are being monitored closely with the aim of stabilising these entities and mitigating any risks that may materialise.

Public entities are expected to have combined deficits of R3.2 billion for 2016/17 and R6.1 billion for 2017/18. This the MTBPS attributed to operating deficits on the long-distance passenger services of the Passenger Rail Agency of South Africa, and lower toll revenues collected by SANRAL. SOEs are expected to move to a cash surplus of R3.9 billion by 2019/20, largely on the strength of higher revenues generated by the Water Services Trading Entity.

The MTBPS lists the following key actions that have been taken to stabilise SOEs:

  • The appointment of a new SAA board in September 2016 tasked with returning the airline to financial sustainability, and filling vacant executive management positions.
  • SAPO raising funds to repay creditors and launch its turnaround strategy, which includes an agreement with labour to reduce the likelihood of strikes.
  • A new tolling dispensation implemented at SANRAL and legal action being taken against users with overdue accounts.
  • The recapitalisation of Eskom in 2015/16.

The  MTBPS states that the “inter-ministerial committee responsible for overseeing the implementation of the reforms has approved the principles that will guide collaboration between state-owned companies and the private sector to accelerate the delivery of new infrastructure projects”.

It also revealed that the Presidential State-Owned Companies Coordinating Council established in July will play a monitoring and coordinating role. 

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