Finance Minister to table his first mini-budget

Monday, October 23, 2017

Finance Minister Malusi Gigaba will this week table his maiden Medium Term Budget Policy Statement (MTBPS) in Parliament.

Appointed to head National Treasury following President Jacob Zuma’s Cabinet reshuffle in March, Minister Gigaba is set to deliver the MTBPS, also known as the mini-budget, in the National Assembly on Wednesday.

Minister Gigaba’s tabling of the MTBPS comes after Statistics South Africa’s announcement last month of the country’s emergence from a technical recession. In the second quarter of 2017, South Africa’s Gross Domestic Product (GDP) grew by 2.5%.

On Wednesday, Minister Gigaba is expected to brief the nation on how South African Airways (SAA) will be funded.

The national carrier, which was moved from the portfolio of Public Enterprises to National Treasury in 2014, has been struggling to pay its lenders and service providers.

Minister Gigaba had previously announced that government is exploring options of establishing a proper capital structure for the airline

At the end of September, National Treasury announced that government has had approved a R3 billion transfer to SAA to allow it to meet its debt obligations to Citibank.

The funds, which were also to be used to assist the airline with its immediate working capital requirements, were from the National Revenue Fund (NRF).

The bailout was done in terms of section 16 of the Public Finance Management Act. This section of legislation states that the Minister can authorise the use of funds to defray expenditure of an exceptional nature, which is currently not provided for and which cannot, without serious prejudice to the public interest, be postponed to a future Parliamentary appropriation of funds.

“A default by the airline on the R3 billion would have triggered a call on the guarantee exposure totalling R16.4 billion, leading to an outflow from the NRF and possibly resulting in elevated perceptions of risk related to the rest of SAA's guaranteed debt,” Treasury said at the time.

This was the second transfer of funds since July.

Deputy President Cyril Ramaphosa has said an Inter-Ministerial Committee on SOEs was looking into strengthening SOEs that need support, including SAA, in order to return to their profitability.

Answering questions in the National Council of Provinces (NCOP) earlier in September, Deputy President Cyril Ramaphosa said challenges faced by the airline were quite complex.

Last week Treasury announced the appointment of six new members to SAA’s board.

The airline further announced network changes both for domestic and regional segments as part of its newly developed five-year plan that seeks to return the company to financial sustainability.

Minister Gigaba has also indicated that the process of assessing the viability of a merger between SAA and SA Express is done, pending a government review. -

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