SAA receives R1bn guarantee, further bailouts not ruled out
· Citizen
South African Airways (SAA) received a R1 billion guarantee in August 2026 to support its working capital requirements after its operations and finances were placed under pressure from the fuel price shock.
National Treasury Director-General Duncan Pieterse stressed ahead of the Medium-Term Budget Policy Statement (MTBPS) speech on Wednesday that the R1 billion was not an allocation but was in the form a guarantee after the airline’s fiscal exposure increased.
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He was unable to rule out any further bailouts to the airline in the future.
Talks underway to find strategic partner for SAA
Pieterse said National Treasury is working with the Department of Transport around a transaction to identify a strategic partner for SAA.
“We are waiting for that transaction advisory work to continue and to be concluded and once that is done, only then will we know whether there are any fiscal outlays associated with that.
“SAA has already received around R50 billion in bailouts over the years and so the reason the strategic equity partner becomes important is so that we can permanently mitigate against that fiscal risk,” said Pieterse.
The MTBPS said SAA has about R223 million in government guarantees related to unflown-ticket liabilities and letters of credit.
“The residual risk depends on its ability to absorb these pressures and meet its operating and financing requirements without additional government support.”
Other entitities presenting risk
The MTBPS said the financial position of other major state-owned companies and public entities remains a source of fiscal risk.
Transnet remains a “material medium-term fiscal exposure” while Eskom’s risk to the public finances has continued to ease.
Denel continues to experience liquidity constraints and remains reliant on fiscal support, and the financial weaknesses in provincial and local government and associated spending pressures “remain significant fiscal risks”.
The government’s guarantee portfolio decreased from R982.4 billion in March 2026 to R960.6 billion in June 2026.
New guarantees include R10 billion for the Land and Agricultural Development Bank of South Africa and R2.2 billion for the Ithala Development Finance Corporation, plus additional guarantees to the South African National Roads Agency (Sanral).
Contingent liability risk
The mid-term budget statement noted that utilised guarantees by state-owned companies declined by R46.1 billion – mainly reflecting a R43.4 billion reduction in Eskom’s exposure following transfers to the power utility in terms of the Eskom debt-relief arrangement and the settlement of a R38 billion bond.
However, it said the reduction in utilised guarantees does not reduce government’s overall fiscal exposure by the equivalent amount because part of it reflects fiscal support already provided.
“On balance, contingent liability risk has remained broadly unchanged since the 2026 Budget, with the level of risk assessed as medium.
“The principal residual risk is concentrated in Transnet and Eskom, whose financial and refinancing pressures continue to pose the risk that government’s existing guarantees will be called on.”
Transnet
The MTBPS said Transnet remains a material medium-term fiscal exposure because of its weak financial position, substantial financing and investment requirements, and reliance on government guarantees.
It said improved operating performance and progress in implementing rail and port reforms have increased revenue and earnings over the past year but ageing infrastructure, maintenance backlogs, high debt and rising debt-service costs continue to constrain Transnet’s financial position.
The principal residual risk is that improvements in operational and financial performance are insufficient to strengthen Transnet’s balance sheet and its ability to finance substantial infrastructure requirements on a sustainable basis.
“Continued operational recovery, implementation of logistics reforms and greater private-sector participation are expected to strengthen Transnet’s financial position and to reduce exposure over time.”
Eskom
The MTBPS attributed Eskom’s easing risk to improvements in operational and financial performance and government’s debt-relief arrangement, which have strengthened Eskom’s balance sheet and reduced refinancing pressures.
However, persistent municipal arrears continue to pose liquidity risk.
The MTBPS highlighted that municipal financial weakness has intensified.
Debt owed by consumers to municipalities increased 13.3% from R427.7 billion in June 2025 to R484.5 billion in June 2026, while amounts owed to municipal creditors increased 18.6% from R156.1 billion to R185.2 billion.
Actual collections amounted to 63.9% of billed revenue, and R99.9 billion of municipal creditors related to bulk electricity.
It said these pressures constrain municipalities’ ability to provide services and meet their obligations.
Pressures on Eskom
The pressures also transmit fiscal risk across the public sector by weakening the financial position of creditor institutions such as Eskom and the water boards.
“Government is mitigating these risks by strengthening expenditure and cash-flow management in provinces and addressing the underlying causes of municipal financial distress,” it said.
“Continued monitoring and intervention aim to restore municipalities’ ability to meet their obligations and reduce the transmission of financial pressures to other public-sector institutions.”
The MTBPS said Eskom’s financial position remains sensitive to its ability to sustain operational improvements, collect revenue and finance substantial investment requirements.
“Structural reform of the electricity sector is intended to improve the sector’s financial sustainability and mobilise additional investment over time.”
Land Bank
The MTBPS said the Land Bank has improved its financial position following the conclusion of its debt restructuring in September 2024, and has reduced its outstanding debt by 82.7% from R40 billion in March 2020 to R6.9 billion in March 2026.
However, investor confidence in the bank remains weak and it has limited access to funding, which constrains its ability to deliver on its core agricultural lending mandate.
The MTBPS said government has provided a R10 billion guarantee, which will enable the Land Bank to raise funding to meet its debt obligations falling due in March 2028 and grant new loans.
Government and the Land Bank are also working to strengthen the bank’s funding arrangements and restore sustainable agricultural lending, while limiting the risk of renewed liquidity pressures and further calls on government support, it said.
Denel
Government guarantees of R660 million and US$14 million (R229 million) have been provided to Denel to support the execution of secured contracts.
The MTBPS said the principal fiscal risk remains Denel’s ability to stabilise its operations and generate sufficient cash flows without further government support.
Provincial risks
The MTBPS said provincial risks are concentrated in the accumulation of unpaid obligations, pressures in provincial health systems, and medico-legal claims.
Medico-legal contingent liabilities have declined from a peak of about R110 billion in 2019/20 to R50.6 billion in 2025/26.
However, the contingent liability remains high and continues to pose a significant risk to provincial health baselines.
It said measures to contain the risk include alternative dispute resolution, improved medical-record management and strengthened medico-legal capacity in provinces, as well as proactively addressing patient safety, negligence and fraud risks to reduce litigation and contingent liabilities.
“Broader reforms to the management and settlement of claims remain under consideration,” it added.
This article was republished from Moneyweb. Read the original here.