Treasury is likely to announce additional funding for the state arms company and a government-owned agricultural lender in this week’s budget. File photo: Reuters.
Treasury is likely to announce additional funding for the state arms company and a government-owned agricultural lender in this week’s budget. File photo: Reuters.

Treasury may bail out Land Bank and Denel

By Bloomberg Time of article published Oct 26, 2020

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JOHANNESBURG - South Africa’s Treasury is likely to announce additional funding for the state arms company and a government-owned agricultural lender in this week’s budget, people familiar with the situation said.

Denel SOC Ltd., which makes attack helicopters and other weapons, will probably receive between R2 billion ($123 million) and R3 billion, the people said, asking not to be identified because the information hasn’t been made public. The Land and Agricultural Development Bank of South Africa will get R1.5 billion to R2 billion, the two people said. Both entities confirmed to Bloomberg that they are seeking money from the National Treasury.

The Treasury declined to comment, saying any announcements will be made when the medium-term budget policy statement is presented on Oct. 28.

South African Airways, the insolvent national airline that needs more than R10 billion to restart, is also likely to receive funds, the people said.

The bailouts will heighten concern about the stress South Africa’s state companies are putting on government finances, with the national power company also having received support. While Denel has been bailed out before it has struggled to pay salaries in recent months. The Land Bank received R3 billion in June as it couldn’t repay its debt.

The companies have been told to try and seek private equity partners for further funding, the people said.

Read more: Wealth Tax Among Mboweni’s Options to Fund South Africa’s Budget

The Land Bank has asked Treasury for R7 billion of support in the financial year ending in 2022 and R1 billion each year for the next three years, the institution said in a response to queries.

“Land Bank needs a combination of capital injection and state guarantees to support the bank’s fund raising,” it said.

BLOOMBERG

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