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 FFC says guarantees place a huge risk on the fiscus as they impact on the budget deficit and fiscal consolidation.

The FFC says the national carrier’s total liabilities have outstripped total assets, with the gap growing wider over the past five years.

National Treasury has now given South African Airways (SAA) a bailout of R10 billion.

Research Director Dr Ramos Mabugu says, “We are saying if this is financed through drawing from national revenue fund and you do that thing, that increases the budget deficit and there is no way of sugarcoating that.”

The FFC also wants the impact of bail-outs to be “strictly processed” via Parliament just like the national budget.

Mabugu says, “If something similar to that process can be replicated for guarantees perhaps that would bring in that high level of accountability.”

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

Part of the recommendations to the airline to improve its balance sheet is to review its wage bill and the perks of pilots, 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.

Momoniat says, “I was Acting DG just to push SAA to get through the airbus contract. This was in December 2015, sitting until midnight. I think the action should have been taken against the board because their actions were reckless and nothing happened.”

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