South Africa’s National Treasury has granted another bailout of ZAR10.5 billion rand (USD638 million) to South African Airways (SA, Johannesburg O.R. Tambo) to allow the insolvent state-owned carrier to implement its business rescue plan.

Delivering his Medium-Term Budget Policy Statement (MTBPS) to Parliament in Cape Town on October 28, 2020, Finance Minister Tito Mboweni said this allocation would be funded "through reductions to the baseline of national departments, public entities, and conditional grants". He said this funding was in addition to the ZAR16.4 billion (USD996.3 million) already allocated in the February 2020 budget for the settling of guaranteed debt and interest.

“You can’t run away from your obligations,” Mboweni emphasized to shouts of discontent from the parliamentary floor. "Our approach is in line with the principle that funding to state-owned enterprises must come from within the current framework and (must be) reprioritized from elsewhere. We need, however, to make it clear that the continuous funding of inefficient, non-functional state-owned enterprises has to be reconsidered. In this instance, we will work together with the Department of Public Enterprises to deal with these matters. For our part, were are determined that whatever the demands, we cannot break the fiscal framework,” he said.

The announcement ends months of uncertainty for the airline, in business rescue since December 2019. A business rescue plan for SAA was already approved by creditors in mid-July. However, the airline has remained in limbo with its fleet mothballed because of a lack of bridging finance while the Treasury and SAA’s shareholder representative, the Department of Public Enterprises (DPE), locked horns on how to fund the rescue. Mboweni on principle repeatedly refused another bailout, but eventually buckled under pressure from DPE Minister Pravin Gordhan, who had made a deal with the trade unions and held firm that SAA had a developmental function going forward.

However, the political opposition Democratic Alliance (DA) strongly criticised the bailout and called on Mboweni to reconsider his position in Cabinet as he had broken his promise of no further bailouts.

"They are choosing SAA over South Africa. This is an indefensible, immoral choice. It amounts to throwing South Africans ‘under the plane’ to pay for SAA," said DA Member of Parliament, Geordin Hill-Lewis, who is also the shadow Minister of Finance. "South Africans will continue to pay for a zombie state company and will continue to suffer the consequences of ever-higher debt. Minister Mboweni should have held the line and refused this bailout," he charged.

Hill-Lewis said the bailout to SAA was funded by budget cuts in other departments, meaning there would be ZAR1.2 billion (USD73.3 million) less for policing; ZAR1.4 billion (USD85.5 million) less for education; ZAR1.2 billion (USD73.3 million) less for the courts and prosecuting authority; and ZAR12 billion (USD733.7 million) less for provinces and local governments.

Meanwhile, Mboweni announced the South African economy was expected to grow by 3.3% in 2021, but warned the country could not sustain its current levels of debt. He said the government was borrowing at a rate of ZAR2.1 billion (USD128.1 million) a day and should be careful to avoid the fate of countries like Argentina and Ecuador that defaulted on their debt this year. He predicted the country's gross debt would rise from ZAR4 trillion (USD245 billion) in 2020 to ZAR5.5 trillion (USD336 billion) in 2023/24. The debt was now only targeted to stabilize in 2025/26, and then only after ballooning to 95% of GDP. However, Mboweni said the South African economy was starting to show "green shoots" and a "strong rebound" was expected in the next quarter, supported by the government's recently announced Economic Reconstruction and Recovery Plan.