In a statement issued on behalf of the Treasury, the government said that the funds provided to SAA had been sourced from the National Revenue Fund (NRF), which under law allows any minister to authorise 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 R20bn 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.
Finance Minister Malusi Gigaba’s office said Standard Charted had requested immediate payment of the money owed, but that the remaining lenders had indicated they were open to deferring the debt.
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“Drawing on the NRF was a tough decision versus the worse one of defaulting. It was taken to reassure lenders that state firms and more importantly the government won’t default,” ministry spokesperson Mayihlome Tshwete said.
The Treasury is under pressure to keep recent pledges to cut spending and reform governance at state firms to fend off credit downgrades deeper into “junk”. Such downgrades would trigger a spike in already soaring borrowing costs on public debt of more than R2.2trillion.
On Friday Finance Minister Gigaba, speaking at the opening of the ANC’s policy conference, unnerved markets when he said the country may need outside financial assistance.The DA said Standard Chartered’s refusal to defer the debt showed it had no faith in the management of the state carrier and that it was also a blow to the credibility of the Treasury.