Organised business has called on President Cyril Ramaphosa to use his sixth state of the nation address (Sona) Thursday to provide clear details on rationalising or closing down struggling parastatals that have been a drain on the country’s finances.
While the president has, in previous addresses and on numerous other occasions, vowed to fix state-owned enterprises (SOEs), many of them, including Eskom, Transnet, the Passenger Rail Agency of SA and Denel, remain in a parlous state. Many of the entities were hollowed out at the height of the state capture project under former president Jacob Zuma.
“This [fixing SOEs] has been an ongoing debate, with little progress. We have said, over many years, that government must be thorough about looking at the SOE environment,” Cas Coovadia, the CEO of Business Unity SA (Busa), told Business Day on Monday.
The crises at the entities have put the government under pressure to show its intent on the restructuring of SOEs and reducing the financial burden on the fiscus.
Ratings agencies have cited SOEs, including Eskom, as the major risk to the sustainability of the country’s finances.
The power utility which supplies virtually all of SA’s power is hamstrung by a staggering debt of nearly R400bn, amid maintenance issues at its ageing power plants leading to the recent bouts of load-shedding, which threatens economic recovery.
Said Coovadia: “The president must be clear that government will rationalise SOE's including closing those that have neither an economic or social reason to exist, combining those that can be combined and ensuring sound governance, clear growth enhancing mandates and productive relationships with the private sector for those that are still needed.”
The Treasury also sees state-owned companies as a major risk to the fiscal framework and has already introduced a strategic equity partner into SAA, enabled private generation of electricity and is planning private participation in the freight rail sector to increase competition, boost efficiency and reliability and reduce costs for customers.
Finance minister Enoch Godongwana introduced the “tough love” policy regarding SOEs — including no further bailouts — at a media briefing ahead of the medium-term budget policy statement (MTBPS) late in 2021
Godongwana said at the time that the government had spent R290bn in assisting SOEs since 2013 at the expense of important social expenditure. “We must be prepared to consolidate some of our state-owned entities and let go of those that are no longer considered strategically relevant,” Godongwana said.
In the MTBPS, two new amounts for SOEs were announced — R2.9bn for Denel to settle guaranteed debt and R11bn for Sasria — to settle claims arising from rioting in KwaZulu-Natal and parts of Gauteng. In the previous fiscal year, about R21bn was given to SAA. Denel received about R2bn in the last two fiscal years, Eskom has received about R136bn out of the government’s 10-year R230bn commitment, and another R10bn was committed to the Land Bank.
Godongwana’s deputy, David Masondo, told MPs recently that the “tough love” approach that the Treasury had adopted towards SOEs might involve the introduction of more private-sector participation.
Trade union federation and key ANC alliance partner Cosatu said the deterioration of SOEs was “deeply concerning”.
“The Zondo Commission into state capture and corruption has provided clear recommendations on measures to tackle corruption. The government needs to act on these, including tabling the necessary legislative amendments at parliament,” Cosatu spokesperson Sizwe Pamla said.
He said the systematic destruction of Transnet and Prasa needed to be urgently addressed. “Their functioning is critical to getting mining, agricultural and manufacturing goods as well as workers to their destinations safely and on time.”
Pamla added that accelerating the rebuilding of Eskom and ensuring reliable and affordable electricity should be a key priority if the economy were to stand a chance.
“This includes moving with greater speed to implement the Eskom social compact, to tackle corruption and wasteful expenditure, to ramp up maintenance, to invest in new generation capacity, and a just energy transition that takes affected workers and communities with and does not leave them behind.”
With Linda Ensor
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