South Africa

FAILING ENTERPRISES

SOEs fail to show financial reforms despite draining the fiscus of billions

SOEs fail to show financial reforms despite draining the fiscus of billions
(Photos: Waldo Swiegers / Bloomberg via Getty Images | Dean Hutton / Bloomberg via Getty Images | Waldo Swiegers / Bloomberg via Getty Images)

In recent months, five beleaguered state-owned enterprises (SOEs) have recorded financial losses of nearly R10bn. Meanwhile, in just three years, they received taxpayer-funded bailouts of R280bn. More bailouts are expected to be announced in the Budget Speech.

Five state-owned enterprises (SOEs) which are broken, constantly depend on taxpayer-funded bailouts and undermine SA’s economic growth potential, are failing to show any demonstrable signs of reforms in their financial situations. 

Over the past nine months, Eskom, the SA Post Office, South African Airways, Denel and the Land Bank have together racked up financial losses of R9.8-billion, a recent presentation by the National Treasury to Parliament revealed. These struggling SOEs have approached the government with a begging bowl and received bailouts of more than R280-billion in just three years.

Arguably, there is nothing to show for the taxpayer-funded bailouts as these SOEs remain a mess — financially and operationally. Eskom, which recorded a financial loss of R7.5-billion in the nine months ending December 2023, still cannot fulfil its basic function of keeping the lights on despite receiving financial support of R265-billion (in tranches) over three years.

Read more in Daily Maverick: Government’s debt relief for Eskom gives power utility some breathing space

The SA Post Office, which is in business rescue and cannot fulfil its postal and package delivery obligations, recorded a R976-million loss from April to the end of December 2023. It stands to receive a further bailout worth R3.8-billion to fund its business rescue process — money that is over and above the R10.3-billion the SOE received during the past nine years.

Read more in Daily Maverick: It’s now up to government to decide on R3.8bn bailout for SA Post Office

South African Airways (SAA) is also in financial disarray. The airline had forecast that it would eke out a profit in 2023 after many years of being in a money-losing position. Derek Hanekom, the interim SAA board chair, who recently signed off the four sets of SAA’s financial statements, told Parliament in November that the airline was showing “a modest profit at this stage and no loss is expected”.

Read more in Daily Maverick: SAA returns to profitability after Covid lockdowns (apparently)

After all, a smaller SAA emerged from the business rescue process; the airline leases fewer than nine aircraft and flies fewer than 20 times a day. Before the airline entered business rescue in December 2019, it leased more than 20 aircraft, flying more than 20 times a day, including domestic, regional and international routes.

However, SAA made a financial loss of R776-million from April to December 2023, the data the Treasury presented in Parliament show. Meanwhile, since 2018, SAA received taxpayer-funded bailouts worth R38.1-billion.

The Land Bank (a state-owned agricultural lender) and Denel (a state-owned arms manufacturer) recorded the lowest financial losses. The Land Bank, which still has not remedied its default on debt repayments since 2020 and is at loggerheads with its creditors and the Treasury on remedy measures, recorded a financial loss of R97-million. 

Read more in Daily Maverick: Land Bank shows promising turnaround signs, but faces long road to recovery

​​Denel is another SOE that guzzles taxpayer funds. It was allocated R3.4-billion in 2022. However, the funds were withheld until Denel finalised a plan to turn around its financial and operational situation. In the nine months ending December 2023, Denel recorded a financial loss of R463-million. 

Pressure on public finances

The continued bailouts for SOEs are a central reason the government’s public finances are constrained. The government has had to borrow money (at costly rates) to fund bailouts for SOEs, and even cut departmental budgets (in areas such as education and health) to free up money to support such entities. 

The government expects its debt to rise from R4.8-trillion in 2023/24 to R5.2-trillion in the next financial year. By 2025/26, it will exceed R6-trillion. Out of every rand generated from tax collection, the government shells out about 20 cents towards paying service costs (such as interest) on the debt. 

When Finance Minister Enoch Godongwana presents the Budget on Wednesday, 21 February, he is expected to announce further support for SOEs, mainly Transnet and the SA Post Office. Transnet, which has another R40-billion in debt repayments due over the next three years, recently received a government guarantee of R47-billion to help settle its debt.

Read more in Daily Maverick: Government throws a R47-billion support package to get Transnet back on track

The government sees Transnet as too big to fail owing to its significance to SA’s economy and its growth potential. Because of this, the Treasury might intervene to further support Transnet, said Sanisha Packirisamy, an economist at Momentum Investments.

“However, extending financial aid to Transnet at a time when fiscal policy is expected to become less stringent ahead of this year’s election will only exacerbate the challenge of establishing SA’s public finances on a sustainable path,” she said. DM

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  • Mpumelelo Mdoda says:

    SOE’S should be privatized through the public-private program, to give fiscal stability and also expertise which are a sore eye for many of these institutions.

    Transnet as well as Eskom should become semi-private to ensure both industries expertise and also much needed financial injection to help bolster reforms and also boost the current pool of workforce which also must step up to the plate to run an effective and well-oiled machine.

  • Jane Crankshaw says:

    Insanity to throw good money after bad like this – even if its in the name of ‘redistribution of wealth’ to ‘Previously disadvantaged’ people under the guise of creating a new “middle class”.
    When will this thieving end? This theft combined with the ineptitude of racist BEE policies will be the end of Mandela’s dream for a successful united rainbow nation and the end of any chance of a long term solution. If your taxpayer flee there will be nothing left for anyone.

  • Bryan Bailey says:

    In the article, they speak of ZAR 280 BILLION………. that will kind of halve Eskoms debt, on the one hand and on the other hand, imagine what this amount can be done for the very people that CONTINUALLY vote for the ANC. This sort of information is what the Multi Party Charter (MPC) should be using to get the ANC voting people to vote for the MPC definitely NOT the EFF or similar as we would then be in a worse situation.

  • Confucious Says says:

    Why would they show any reforms when there is zero accountability… nor account-ability!?!

  • Derrick Smit says:

    South African voters need decent, afforable healthcare and education, not a redundant national airline. Most voters will never fly in their lifetimes.

  • Kyriacos Demetriades says:

    This is a sustained effort by the government, their cadres and families to completely loot the fiscus until there is nothing left. The proposed NHI is just an expansion of this looting spree. Nothing has changed .

  • Charles Butcher says:

    If anyone wants evidence of how serious the anc theft is this must be it

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