National Treasury plans to lay down criteria for government funding of state-entities in a bid to reduce their reliance on the fiscus, finance minister Enoch Godongwana says.
Set conditions would simplify decisions by the National Treasury on bailouts for state-owned enterprises (SOEs) which have been a drain on government finances for many years, he told MPS on Wednesday.
Having set criteria is in line with the “tough love” approach that Godongwana has advocated as the government seeks to improve the performance of SOEs, including Eskom, SAA and Denel, which rely on regular cash injections to keep operating.
Delivering the medium term budget policy statement (MTBPS) in November, Godongwana said struggling state enterprises needed to drastically improve their performance before receiving any further government funds.
In his speech on the National Treasury budget vote he said a review of governance systems at several high-risk SOEs was in progress and the department was also working on a sustainable solution for Eskom’s debt of about R392bn “that is equitable and fair to all shareholders”.
“Eskom is faced with a large amount of debt that remains a challenge to service without assistance,” he said in his MTBPS, adding that further details would be released later this year.
Godongwana said Treasury was also working on tracking climate-related expenditure in the national budget system. “It provides comprehensive data on climate-relevant spending, enabling government to make informed decisions and prioritise climate investments,” he added.
To improve the efficiency of expenditure and the delivery impact of programmes over the medium term, the recommendations arising out of the spending reviews will be implemented. Some programmes needed to be reviewed and there were also new spending areas such as climate change.
“We are advocating coherent economic policy. National Treasury is reviewing the government’s macroeconomic policies, from the global financial crisis of 2008 to 2020,” Godongwana said.
The review will examine how key indicators have evolved and will assess the policy implementation. “Policy recommendations emanating from the review will be engaged with stakeholders and would be communicated through the budget process,” he said.
Godongwana noted the increasing number of municipalities in financial distress or that have been placed under government administration. “The local government situation is bad,” he said, and emphasised that “national economic growth is anchored in strong local economies which are reliant on an effective local government”.
Local government support mechanisms were being harnessed in partnership with the department of co-operative governance and traditional affairs to intensify assistance.
These interventions included capacity building and programmes to improve municipal audit outcomes, particularly for municipalities with the highest levels of irregular, fruitless and wasteful expenditure.
There are also direct interventions in terms of Section 139(7) of the constitution, such as in Lekwa and more recently in Mangaung and Enoch Mgijima. Attempts are also being made to deal with the instability in Nelson Mandela Bay.
“There are 43 municipalities that meet the criteria to be placed under mandatory intervention. I have already written to the premiers of all provinces in October last year identifying these municipalities and that the mandatory intervention process must begin in earnest,” he said.
“Nursing our municipalities back to financial health will boost the quality of life of residents, it will encourage economic activity and investment, and it will encourage tax and ratepayers to pay for services.”
National Treasury will together with local government implement five township economic development strategies and identify 20 “catalytic projects” in areas within metropolitan cities, secondary cities and rural towns.
Godongwana stressed that the assistance for municipalities would also require the support of all political parties to ensure stability.
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