South African state firms seek coronavirus crisis bailouts

By ALEXANDER WINNING

South African state companies have asked for billions of rand in government funding to help them through the coronavirus crisis, a finance ministry presentation to parliament on Tuesday showed.

Loss-making state firms have been a long-term drain on Africa’s most industrialised economy, requiring bailouts that have strained public finances at a time of weak economic growth, helping to tip its sovereign credit to a “junk” rating.

The South African Post Office (SAPO) has requested 4.9 billion rand ($293 million) in support, while broadcaster SABC is seeking 1.5 billion and airports operator ACSA has applied for an equity injection of 3.5 billion, the presentation showed.

Ailing power utility Eskom’s financial performance is worse than budgeted for as a result of limited economic activity during the pandemic, while arms firm Denel faces the risk of entering bankruptcy protection or being liquidated, the report by National Treasury officials revealed.

SABC told Reuters it had displaced revenue-generating programming, while expanding news content and educational coverage because of the COVID-19 pandemic.

SAPO and Eskom did not respond to requests for comment. ACSA was not immediately able to comment and Denel declined comment.

Denel, which makes military equipment for South Africa’s armed forces and clients around the world, told Reuters last week that it was not planning to seek new government equity injections, despite a liquidity crunch.

It is unclear how much funding will be issued to the firms.

Ratings agency Moody’s said in a research report on emerging markets on Tuesday that there was a “meaningful risk” of wider deficits in countries like South Africa because governments could be forced to expand support to weak state firms.

South Africa’s economy is forecast to contract at least 7% this year and its budget deficit could balloon to as much as 16% of gross domestic product because of the COVID-19 crisis.

One bright spot in the presentation was state agricultural lender Land Bank, which it said had resumed interest payments to lenders from Aug. 11, after defaulting earlier this year and being promised a bailout in a June budget. (Reuters)