CAPE TOWN – South African Airways will receive a bailout from government. The money will come from the National Revenue Fund
The funds will be used by the airline to pay back the debt obligations it owes to Citibank.
"Funds will also be used to assist SAA with its immediate working capital requirements," the National Treasury said in a statement.
"This payment was done in terms of section 16 of the Public Finance Management Act. This section of legislation states that the Minister can authorise the use of funds to defray expenditure of an exceptional nature which is currently not provided for and which cannot‚ without serious prejudice to the public interest‚ be postponed to a future Parliamentary appropriation of funds. The due process laid out in the legislation will be followed.
"A default by the airline on the R3-billion would have triggered a call on the guarantee exposure totaling R16.4- billion‚ leading to an outflow from the NRF and possibly resulting in elevated perceptions of risk related to the rest of SAA's guaranteed debt."
"Given the nature of the problems at SAA‚ section 16 of the PFMA had to be used as the last resort."
It has been reported that SAA owes R7-billion in debt and was ordered to pay back R1.9-billion to Citibank by the end of September.
-BUSINESS REPORT ONLINE