SABC News - SAA bailout: Economists warn of dire consequences:Monday 2 October 2017

SAA bailout: Economists warn of dire consequences

Monday 2 October 2017 12:05

SABC

Treasury says the R3 billion bailout at SAA will prevent the airline from defaulting on its loan to CitiBank.(SABC)

Economists have warned that the recent transfer of additional funds from Treasury to South African Airways (SAA) will not sit comfortably with credit ratings agencies.

Treasury says the R3 billion bailout at SAA will prevent the airline from defaulting on its loan to CitiBank.

However, economists say the transfer will lead to toxic conditions - which may result in another ratings downgrade.

Jana van Deventer, head of financial markets at ETM Analytics, says South Africa's Fiscus is already under significant pressure.

"That is essentially taxpayers' money that's being used to bailout an entity like SAA."

"It is a decision which is not budget neutral and highlights how we are not in a good situation."

"South African Airways (SAA) will require more bailouts as the entity is struggling to raise funding in the market."

In August Finance Minister Malusi Gigaba said there are no plans to privatise South African Airways.

He added government will work to ensure that the airline implements its turnaround strategy and that it does continue to rely on government bailout.

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