Borrowing for balance

2014-02-27 00:00

SOUTH Africa expects to balance its budget by borrowing almost R163 billion this financial year, and increase that amount to almost R180 billion the following year.

In 2016/17, that debt is expected to decline to R151 billion.

In addition, government will borrow R155 billion over the medium term to finance debt due. These are all financed through loans made in the local and global markets and by using surplus cash.

Finance Minister Pravin Gordhan yesterday said the medium-term capital expenditure by the major state-owned companies was projected to reach R382 billion. They include government’s usual cash cows — Eskom, Transnet and the SA National Roads Agency (Sanral).

According to Budget Review figures, the state-owned companies have improved their performances, spending R110 billion of a budgeted R138 billion (almost 80%). This compares favourably with the R93 billion they spent from a budgeted R132 billion the previous financial year.

The underspending is blamed mainly on contractors who have not reached their targeted delivery schedules, labour unrest, poor weather, materials shortages­ and engineering delays.

Eskom and Transnet spent a combined R88 billion during this period, resulting in a total expenditure by state-owned companies of R284,3 billion.

In previous financial years, infrastructure investments led to a steady increase in the asset base of state-owned companies. However, in the 2012/13 financial year, their average return on equity slowed to four percent — down from 7,6% the previous year, mainly due to lower earnings and higher operational costs at Eskom.

Government plans to raise the R235,3 billion required for infrastructure development by these state-owned companies in debt markets. The remainder will come from internally generated cash. Eskom and Transnet will again account for the bulk of these borrowings.

Gordhan said government has borrowed more than R1 trillion over the past five years. He added, however, that SA’s debt portfolio was well structured, with foreign currency denominated debt limited to about 10% of the total.

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