South Africa’s government has set aside R16.4 billion ($1.1 billion) over the medium term for South African Airways to repay guaranteed debt and to cover debt-service costs.

The national treasury has disclosed the figure in its newly-released 2020 budget review.

It states that the government also anticipates that additional funding will be required to cover restructuring costs, following SAA’s placement under business rescue.

SAA has incurred net losses of more than R32 billion in the past decade, while those of regional operator SA Express – also under business rescue – have reached R1.2 billion over the same period.

The government will need to “assess its appetite” for continued ownership of SA Express, says the review, given its “limited role” in the local aviation market.

In an effort to progress towards fiscal sustainability the government has cut the baseline of budget expenditure by R156.1 billion over the next three years – the equivalent of about 1% of GDP per year – compared with 2019 budget projections.

Increased support to financially-distressed state-owned companies – including SAA and energy firm Eskom – has increased by R60.1 billion over the medium term, it says, adding to the government’s spending pressures.

The government has set aside R16.4 billion for SAA to repay guaranteed debt and interest costs over the next three years.

“Costs of this adjustment are still being finalised, and will be financed from existing provisional allocations for state-owned companies,” says the budget review.

It points out that the market attaches increased risk to state-owned companies, which are paying “substantially more” to borrow – with the highest cost for guaranteed debt. SAA’s borrowing incurs nearly twice the interest rate of government, the review adds.