Bankruptcy principles remain the same for state owned firms

The restructuring of South African Airways (SAA) has been in the news for a while now. A recent Business Day piece says:

SAA was never a good candidate for business rescue. This is evidenced by it not being able to trade itself to liquidity without relying on post-commencement financing (PCF) of R10.5bn — at the taxpayers’ expense.

These “cash injections” are from the government. If this isn’t a giveaway, I’ll spell it out – the airline is wholly owned by the South African government. This particular story is about a South African business owned by the state but it rings true for many other state owned business. Businesses that are not viable should be allowed to fail even if they are owned by the state. Its a message worth repeating.

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