Budget 2022

Mboweni: Does SA really need state-owned enterprises?

accreditation
Minister of Public Enterprises Pravin Gordhan. (Yunus Mohamed/Photo24)
Minister of Public Enterprises Pravin Gordhan. (Yunus Mohamed/Photo24)

State-owned enterprises (SOEs) pose a "very serious risk" to the fiscus, Finance Minister Tito Mboweni said.

The minister tabled the National Budget in Parliament on Wednesday, where he highlighted that the deteriorating financial position of several large SOEs pose a risk to the SA economy and public finances.

"Funding requests for SAA, SABC, Denel, Eskom and other financially challenged state-owned enterprises have increased, with several requesting state support just to continue operating.

"Isn't it about time the country asks the question: 'Do we still need these enterprises?'" Mboweni asked the National Assembly.

He said that, when it comes to government's approach to SOEs, there are no holy cows. Government is currently reviewing the framework for SOE support.

So far government has revised contingency reserves to R13bn for the 2019/20 fiscal year, to respond to possible requests for financial support by companies.

"Financial support will be budget neutral as far as possible," Mboweni assured.

Over the past year government guarantee use increased by R51.5bn. Government dished out R50bn to power utility Eskom, R1bn to arms manufacturer Denel and R6.2bn to national carrier South African Airways (SAA).

"We must tighten the guarantee rules," Mboweni said. He proposed that, if SOEs require guarantees for operational purposes, the there should be a condition for them to appoint a chief reconfiguration officer, who will undertake a full operational and financial review.

The goal is for the officer to be the "eyes and ears" of government in SOEs and to make sure that they are good stewards of the funding they have been allocated, Mboweni told journalists at a briefing ahead of delivering the budget speech.

"We want to look after every rand and cent provided," he said. "There is no free lunch here."

During his address to Parliament, Mboweni said Cabinet is considering a proposal to end the issuing of guarantees for operational purposes.

"Expiration dates on guarantees will also be strictly enforced," Mboweni said. He added that strategic equity partners for SOEs will also be found, where possible.

In the 2019 Budget Review, Treasury unpacks the risk SOEs pose to the fiscus.

Several SOEs are financing operations with debt and some are "perilously close" to a default unless they receive some form of recapitalisation, the review states.

Several entities cannot meet obligations to their employees, public and debt holders because of weak revenue growth, high compensation costs to employees due to over-staffing and debt servicing costs which have accumulated over years and are now weighing down profitability.

Over the next 23 years, a total of R630bn debt will fall due. Government guarantees 54% of this debt or R340.2bn. Over the medium term (the next three years) R155bn will fall due. Of this government guarantees R61bn.

Treasury highlighted that there is a risk government will be called upon to refinance the debt, as some SOEs are not in a position to do so themselves. This will have "major consequences" for public finances, Treasury said in the budget review.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24
Rand - Dollar
17.09
-0.4%
Rand - Pound
20.66
+0.0%
Rand - Euro
17.80
-0.1%
Rand - Aus dollar
11.54
+0.0%
Rand - Yen
0.12
-0.0%
Gold
1,754.60
0.0%
Silver
21.61
0.0%
Palladium
1,856.61
0.0%
Platinum
984.00
0.0%
Brent Crude
83.63
-2.0%
Top 40
66,754
-0.0%
All Share
73,151
+0.0%
Resource 10
71,441
-0.1%
Industrial 25
87,347
-0.2%
Financial 15
16,370
+0.4%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders