As Bloomberg pointed out the other day, South Africa’s credit rating may come under pressure as growth in Africa’s biggest economy slows and the government faces the prospect of bailing out the state-owned road agency. That prospect became more of a reality today when deputy president Kgalema Motlanthe said government is looking into a special appropriations bill to give Sanral a cash injection to allow it to service its R20 billion debt.

Bloomberg noted a few days ago:

The government is facing rising debt levels. Sanral, as the state-owned road agency is known, risks defaulting on R37 billion of debt if it’s prevented from charging tolls on roads in Gauteng province, Pravin Gordhan said on May 23. That may require the government to repay the debt on behalf of Sanral, undermining the nation’s credit rating, he said.

“If government were forced to redeem Sanral’s debt as part of a call on the guarantee and debt acceleration, then there will be large negative implications for the budget deficit and government issuance,” Carmen Nel and Mamello Matikinca, analysts at FirstRand Ltd. (FSR) in Johannesburg, said in an e-mailed note to clients today. “It would become more difficult to contain the spill-over to other parastatal debt.”

Jimmy Manyi has already said, “Government will pull [out] everything it can to ensure Sanral meets its obligations,” so this latest development shouldn’t shock you.

Kgalema Motlanthe, speaking earlier, said:

Government has to look at other ways of servicing that debt, which means taking away money from other allocation [and] hence the consideration of introducing this special bill to enable government to continue keeping Sanral in a healthy state of servicing the debt.

In other words, find a legal way for the taxpayer to continue paying the bills for something that doesn’t work.

Motlanthe reiterated that failure to meet Sanral’s debt repayments while the legal battle over e-tolling in Gauteng continued would have dire consequences for the roads agency and the country, obviously.

[Sources: Bloomberg, Sapa via TechCentral]