South African state firms request bailouts over COVID-19

South African state companies have requested billions of rand in funding from the government to help them weather the impact of the coronavirus crisis, a finance ministry presentation to parliament showed on Tuesday.

Loss-making state companies have long been an Achilles heel for Africa’s most industrialised economy, requiring bailouts that have placed its public finances under huge strain at a time of weak economic growth and helped push its sovereign credit rating to “junk” status.

The South African Post Office had requested 4.9 billion rand ($292.87 million) in support, broadcaster SABC was seeking 1.5 billion and airports company ACSA had applied for an equity injection of 3.5 billion because of the impact of COVID-19, according to the presentation by National Treasury officials.

Ailing power utility Eskom’s financial performance was worse than budgeted for as a result of limited economic activity during the pandemic, and arms firm Denel faced the risk of entering bankruptcy protection or being liquidated, it added.

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The companies did not immediately respond to a Reuters request for 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 aggravated by the pandemic.

It is unclear how much funding will be issued to the state firms. South Africa’s economy is forecast to contract at least 7% this year because of the coronavirus crisis and its budget deficit could balloon to as much as 16% of GDP in the current fiscal year.

One bright spot was agricultural lender Land Bank. It had resumed interest payments to lenders from Aug 11, the presentation showed, after defaulting earlier this year and being promised a bailout in a June budget. – Thomson Reuters Foundation.

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