Govt assumes Air Zim’s US$140mln debt

THE government will assume responsibility for Air Zimbabwe’s $140 million debt in a bid to help the technically insolvent flag-carrier back on its ‘wings’, Transport Minister Nicholas Goche has said.

The airline has been crippled by numerous operational problems including mounting debts, ageing aircraft, undercapitalization and labour disputes with key staff.

Goche said the government had agreed to takeover the debt and help find the company a technical partner.

“Last Thursday Cabinet … resolved that, Air Zimbabwe as a strategic Government asset and brand, needed to be preserved and supported as a going business concern,” Goche told The Herald.

“To this end, Government must assume Air Zimbabwe's current debt (currently standing at US$140 million) and ring fence the same."

Air Zimbabwe chief executive, Innocent Mavhunga recently urged government to help liquidate the airline’s huge debt pile comprising $112.7 million internal obligations and $25 million owed to institutions outside the country.

“Our cost of operating the business sits at about $6 to $7.5 million,” Mavhunga told Parliament’s Portfolio Committee on State Enterprises and Parastatals at a recent hearing.

Meanwhile, Goche said proceeds from the planned part-privatisation of the airline would be used to offset the debt while staff numbers would also be reduced to cut operating costs.

"In order to realise additional financing, there is urgent need to find a strategic partner for the national airline through private placement, that is, directly approaching would-be interested investors and forming a joint venture partnership," he said.

In addition, the National Handling Service (NHS), a subsidiary of the airline, would also be privatized to secure additional funds.

"Efforts to partially dispose of the National Handling Services should be pursued with urgency now in order to secure some financing from within the airline in order to avoid overburdening Treasury,” Goche said.

Air Zim too rotten to sell — minister

Air Zimbabwe is in such shambles and its financial position so hopeless it would be difficult to find takers even if the government decided to offload it, a Cabinet minister has said.

State Enterprises and Parastatals minister Gorden Moyo on Wednesday told the Parliamentary Portfolio Committee on State Enterprises and Parastatal Management finding an investor to buy the ailing airline was likely to prove a mammoth task.

Moyo was responding to a question by Chiredzi North MP, Ronald Ndava, a member of the Portfolio Committee chaired by Zvishavane-Runde MP, Lawrence Mavima, who had asked him to explain why his ministry was not disposing of loss-making parastatals that were draining the fiscus.

“There are certain entities where we think surely, government should be out of,” Moyo said.

“But it may not be easy to sell Air Zimbabwe right now even if you want to offload it because you may not find a taker because of its state,” he said.

Moyo however said the difficulties facing Air Zimbabwe were not unique to Zimbabwe as a lot other airlines around the globe were performing very poorly. He cited Zambia Airways as an example.

“It is not just Air Zimbabwe which is suffering — very few airlines are doing business and it might be a big problem to sell Air Zimbabwe. A lot of parastatals are faced with huge debts and this on its own makes our parastatals unattractive to suitors. To get investors investing in a shell is not easy because of this debt overhang,” Moyo said. Moyo indicated most of the equipment in the country’s parastatals was dilapidated and archaic. To get investors to inject funds into businesses that were going under was not easy.

“The fiscal space is also too constricted to inject capital or even expertise into these entities especially given the serious human capital flight Zimbabwe has suffered,” he said.

State Enterprises and Parastatal Management deputy minister Walter Chidakwa said the issue of marketability to suitors by ailing parastatals was affected by tariffs.