South African Airways trying to recover US$60m blocked in Zimbabwe due to Harare’s foreign currency crunch
South African Airways (SAA) is in the process of trying to recover about R1.1 billion in blocked funds that it has been unable to extract from Zimbabwe and Nigeria, with the help of the International Air Transport Association (IATA).
The state-owned airline’s blocked funds in Zimbabwe amount to about US$60 million (about R1 billion). In Nigeria, it is owed roughly US$5 million (about R85 million).
It could certainly put the blocked funds to good use.
IATA defines blocked funds as revenue an airline cannot transfer from a country due to exchange controls imposed by the government of that country. Funds can also be blocked if the host government experiences foreign currency shortages.
Zimbabwe has been facing foreign currency shortages since 2016, resulting in institutions and people with foreign debt exposure failing to repatriate money from the southern African country.
SAA says its money still blocked in Zimbabwe is being recovered in small instalments while it tries to find a better solution.
IATA, headquartered in Geneva and acting for the airline industry, told News24 it is working with the Reserve Bank of Zimbabwe (RBZ) to free up the blocked funds. Together they have established a plan under which the central bank is reducing the amount of withheld funds monthly.
The funds in Nigeria are being recovered in cooperation with local banks, IATA, and the Nigerian Central Bank, although it is not an easy process, SAA said in response to questions from News24.
Repatriation issues arose in March 2020 when demand for foreign currency outpaced supply and the country’s banks could not service currency repatriations.
Get the money out
IATA, meanwhile, has again called on governments to remove all barriers to airlines repatriating their revenues from ticket sales and other activities in line with international agreements and obligations.
“Preventing airlines from repatriating funds may appear to be an easy way to shore up depleted treasuries, but ultimately the local economy will pay a high price,” Willie Walsh, IATA’s director general, said during a recent media briefing.
“No business can sustain providing service if they cannot get paid, which is no different for airlines. Air links are a vital economic catalyst. Enabling the efficient repatriation of revenues is a critical for any economy to remain globally connected to markets and supply chains.”