The Treasury has made no new allocations, either through direct fiscal allocations or state guarantees, to ailing state-owned entities (SOEs), reflecting finance minister Enoch Godongwana’s tough love approach to SOEs given the potential drag the entities have on growth.
The Treasury outlined this proposal on Wednesday in Godongwana’s medium-term budget policy statement (MTBPS). Priority will be given to continued restructuring of Eskom and to establishing a competitive energy market with adequate supply for a growing economy. Opening freight rail access to third parties will be accelerated to reduce inefficiency and costs, helping firms offer lower prices and boosting economic growth, the Treasury said in MTBPS documents.
Separating the department of mineral resources and energy into two departments will be completed by April, in line with the newly configured cabinet and the formation of the government of national unity (GNU).
The electricity and energy department, headed by minister Kgosientsho Ramokgopa, will develop transmission infrastructure required for the envisioned competitive energy market that includes the private sector and state power utility Eskom (which previously held a monopoly over transmission). The new ministry will also be responsible for implementation and oversight of the amended Electricity Regulation Act (2006), and manage the integrated national electrification programme.
“The government is reviewing the integrated national electrification programme grant and will finalise related reforms over the medium term,” the MTBPS documents read.
The Treasury warned that its allocation towards Eskom’s R254bn debt-relief programme, aimed at stabilising the power utility, would be further reduced by R2bn to R64bn should the entity fail to dispose of the Eskom Finance Company (EFC) by end-March 2025. The Treasury previously reduced the entity’s debt relief allocation for the 2023/24 and 2024/25 periods, owing to the utility’s failure to dispose of the EFC.
The move follows a decision by the Treasury to amend the Eskom Debt Relief Act, which provides the minister with powers to reduce the amount of debt relief provided to Eskom in the event the entity does not meet the conditions.
“They still have not sold the EFC and they are going through that process, and we continue to evaluate the package as we move forward. One of the questions we have to answer by the time we get to the budget next year is where is Eskom relative to the conditions that are there, and to the extent that the conditions have not been met then the minister will have to consider whether that warrants a change in the debt-relief package,” the Treasury’s director-general, Duncan Pieterse, said at a pre-MTBPS media briefing.
The Treasury was attaching similar conditions to other facilities to SOEs such as Transnet, which was given a R47bn guarantee in 2024 “mainly because of pressure from parliament and others, where there was not really any concern about the size of the bailouts that were going to state-owned companies, but the mechanisms which the Treasury can use to achieve transformation of sectors and entities”.
Eskom has kept load-shedding at bay for more than 200 days this year due to a sustained improvement in the performance of power stations.
“The Electricity Regulation Amendment Bill was signed into law in August of this year. This, together with the creation of the National Transmission Company of SA, which began operating on July 1 2024, is establishing rules and procedures for a competitive electricity market,” the Treasury said in the medium-term budget documents.
“The ongoing energy action plan has boosted efforts to restore energy availability and procure new generation. By end-August 2024, project registrations with SA’s energy regulator exceeded 8,500MW.”
To provide for onboarding private operators into the rail network, the Economic Regulation of Transport Bill — enabling private sector use of the rail network — was signed into law in June.
“Although Transnet can access capital markets, its ability to raise more funding is constrained by accumulated debt levels. These in turn have led to unsustainable interest costs and refinancing risk, resulting in liquidity pressures,” the Treasury said. “Optimising the entity’s capital structure and returning it to profitability will require Transnet to shed noncore assets, reduce its current cost structure and explore alternative funding models for infrastructure and maintenance, such as project finance, third-party access, concessions and joint ventures.”
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