South African Treasury Says No Bailout Approved for State Firms

(Bloomberg) -- South Africa’s National Treasury denied that the government has approved a bailout package of 59 billion-rand ($4.1 billion) for state-owned companies.

“A cabinet lekgotla is not a place where budget bids are tabled,” the Treasury said in an emailed response to questions after the Sunday Times reported the rescue plan was discussed at a cabinet meeting convened by President Cyril Ramaphosa last week. The South African National Roads Agency Ltd. would receive a cash injection, while the Post Office, South African Airways and the South African Broadcasting Corp. would get guarantees to allow them to borrow more, the Johannesburg-based newspaper reported.

State firms under the rule of former President Jacob Zuma were plagued with ill governance and financial mismanagement. Government guarantees to state companies stand at more than 450 billion rand, according to data from the National Treasury. The state’s exposure to this increased to 64.5 percent in the fiscal year to March from 54.4 percent as companies drew on the guarantees.

Credit-ratings companies have flagged state firms’ finances as a concern in recent years. The Reserve Bank said in April the inability of these companies to roll over debt could threaten the nation’s financial stability and ultimately result in more downgrades after S&P Global Ratings and Fitch Ratings Ltd. cut their assessments of South African debt to junk last year.

Finance Minister Nhlanhla Nene is scheduled to present his mid-term budget to lawmakers on Oct. 24 and will have to balance increasing spending needs with tax income that’s under pressure in an economy that hasn’t expanded at more than 2 percent annually since 2013.

Spending bids that have been approved by cabinet will be announced in February or in the adjustments budget in October, the Treasury said.

The cabinet has not yet announced what it discussed or decided at last week’s meeting.

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