FFC proposes tougher bailouts rules

Reading Time: 2 minutes

The Financial and Fiscal Commission (FFC) says government guarantees should not be used as an “easy option” to balance the books of state owned companies. The Commission says guarantees place a huge risk on the fiscus as they impact on the budget deficit and fiscal consolidation.

Reviewing the medium term outlook for South African Airways as well as how ongoing losses impact on the fiscus, the FFC says the national carrier’s total liabilities have outstripped total assets with the gap has grown wider over the past five years. National Treasury has given the airline a bail out of R10 billion.

The FFC also wants the impact of bail outs to be “strictly processed” via Parliament just like the national budget.  “If something similar to that process can be replicated for guarantees maybe it would bring in that high level of accountability,” says FFC’s Dr Ramos Mabugu.

“It’s an embarrassment and now we have to bail out these entities. It clearly shows there’s failure and there must be consequences,” said Acting Treasury DG Ismail Momoniat.

Part of the recommendations to the airline is to improve its balance sheet is to review its wage bill and the perks of pilots, to implement strict procurement controls and renegotiate lease contracts. The FFC also recommends the sale of non-core assets such as Airlink and Treasury says it had warned against some of the costs, like the R6 billion Airbus deal.

SAA is set to report to the Appropriations Committee next week.