Finance minister Enoch Godongwana used his medium-term budget on Wednesday to underline his tough love approach to ailing state-owned enterprises (SOEs), tightening up conditions for Eskom’s debt relief package and making it clear he wouldn’t even discuss a Transnet bailout unless it bought into the government’s new roadmap to transform SA’s logistics sector.
This came as the minister delivered a budget which surprised many in the market with lower-than-expected deficit numbers, despite an estimated R57bn shortfall in revenue for the current year, and stayed on course to stabilise the public debt ratio in the medium term.
Treasury officials said the “heavy lifting” on fiscal consolidation would come from R213bn of spending reductions over four years, but there would not be across-the-board cuts and the focus would be on areas with less impact on service delivery.
Godongwana also pencilled in R15bn of tax measures, details of which will be announced in February’s budget.
But he warned that with total government debt now set to climb to over R6-trillion and the cost of borrowing rising, the government is paying R1 of every R5 it collects in taxes to lenders, crowding out growth and service delivery.
The minister also warned that the government would not again make the mistake of bailing out SOEs without imposing conditions, and enforcing these.
“The template [in the past] has been that we can’t afford them to collapse so we sign a cheque with no guarantee of efficiency gains,” he told journalists at a briefing ahead of his speech. “We’ve been trying to fix Eskom, not fixing power to the grid. Similarly, we don’t just want to deal with Transnet but with the efficiency of the logistics sector.”
Godongwana is to change the terms of the R254bn Eskom debt relief package to allow the Treasury to reduce the amount if Eskom fails to deliver on the stringent conditions attached to it. He will also change the loans to Eskom to interest-bearing, not interest-free, a change he described in an interview as penalising Eskom for failing to meet conditions.
And while he said that he had not closed the door to Transnet, which came to the Treasury a couple of weeks ago with an “invoice”, he said the door wasn’t very wide open either.
Transnet said at the release of its financial results last week that it needed a R100bn bailout from the government to support its turnaround plan.
Godongwana said on Wednesday that he would have this conversation only once Transnet had internalised the new logistics roadmap in its turnaround plan.
The roadmap has a strong focus on ending Transnet’s monopoly and bringing private players into the sector.
Godongwana told Business Day that Transnet had just been “ticking the box” on private participation, as it did when it offered slots on its railway lines for only two years.
And he said Transnet might need much less bailout money, if any, once it incorporated the roadmap into its plans.
He also announced the establishment of an infrastructure finance and implementation support agency to mobilise private finance and fast track the delivery of projects that would lift growth and improve access to basic services.
Godongwana told Business Day that there were too many infrastructure projects that couldn’t be transformed into financial projects. He had been talking to SA’s top 14 pension funds and the Association for Savings and Investment: they all wanted instruments in which they could invest and he will have some investments to announce in February, he said.
Some of the instruments could be listed on the JSE and he has been talking to the JSE about this. It is within Treasury’s purview to go ahead with these projects given that it puts up the guarantees, the minister said.
More details on the agency, which could bring together existing government initiatives, will be provided in February.
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