Written by Mike Cohen  | From Bloomberg

Privatization is back on the South African government’s agenda for the first time inmore than a decade as it runs out of options to bail out cash-strapped state companies.

A stake in South African Airways, the loss-making national carrier, may be one of the first on the block, with Etihad Airways PJSC given the option of buying a minority interest. Finance Minister Nhlanhla Nene announced plans in October to raise at least 20 billion rand ($1.74 billion) by selling “non-strategic” assets to help power utility Eskom Holdings SOC Ltd. plug a 225 billion-rand cash-flow gap.

As recently as 2009, the ruling African National Congress was discussing the option of nationalizing mines. Strikes and power shortages that have curbed growth and tax revenue and left the nation’s credit rating on the brink of junk status have spurred a change in thinking.

“The policy shift is significant,” Azar Jammine, chief economist of Johannesburg-based advisory service Econometrix, said by phone yesterday. “It illustrates the tremendous dilemma the government is facing in terms of where to get the money to run the state companies, which are in such disarray.”

South Africa’s last major asset sale was in March 2003, when it sold 25 percent of telecommunications company Telkom South Africa Ltd. for 3.9 billion rand. The government disposed of 20 percent of SAA to Swissair in 1999 and bought it back in 2002 when the European carrier went bankrupt.

Policy Shift

The sale of a minority stake in SAA to Abu Dhabi-based Etihad wouldn’t constitute a big policy shift by the ANC, according to party spokesman Zizi Kodwa.

“When you implement policies, you can’t be dogmatic,” he said by phone from Johannesburg. “They must be informed by the conditions that exist at a particular time. There is nothing wrong if you take partners from outside to come and build capacity.”

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