Not much wrong with state-owned firms — just a lapse in governance, says Gigaba

The only problem with state-owned entities is a lapse in governance, according to Finance Minister Malusi Gigaba.

Speaking at the Ekurhuleni Investment Conference on Monday, Gigaba said: "Often we talk ourselves down in a whole lot of ways. If you look at most of our SOEs, they actually are functioning very well.

"Even those who have one or two problems are making a significant contribution to the economy."

Eskom had massive investment programmes with three new power stations coming up that would power the South African economy, he said.

And without South African Airways‚ tourists and businesspeople would not be able to fly to and around SA.

"You would be made to believe that all is not well with our state-owned entities," he said.

SAA last made a profit in 2011 and relies on government funding to keep it afloat. Eskom had R322bn worth of debt at March 1.

The first problem to fix was the governance of SOEs.

"Problems are created by a lapse of governance… because of the shareholder dropping the ball by not ensuring companies where they are shareholders are governed as well as they should be.

"I would be much more comfortable if we provided guarantees for state-owned entities to bolster their balance sheets … instead of financing incompetence and corruption."

Without state-owned companies, SA would not have the infrastructure it had, he said.

"I believe there is nothing inherently inefficient in our state-owned entities. They pay well, and should able to recruit well-qualified professionals to run these entities."

Singling out Eskom, he said it had taken only about R200bn of its R350bn guarantee and it might begin to pay back its guarantee and reduce its contingent liabilities.

Transnet had a vibrant small enterprise hub, he said.

"It is quite important for bigger state-owned entities to develop those capabilities as part of a merger as a contribution to economic transformation."

The government plans to spend nearly R950bn over the next three financial years; SOEs will make up 46.7% of this expenditure. The total guarantees to SOEs amounted to R477.7bn in 2016-17 — roughly 10% of gross domestic product (GDP).

With TMG Digital