Finance minister Enoch Godongwana has promised “tough love” to state-owned companies. We will see this week the extent of his commitment when he tables his second budget since he became finance chief.
His predecessor, Tito Mboweni, often used a hippo to demonstrate the gaping mouth, or hole, that SOEs and other competing needs present.
It is four years since SAA went into business rescue. The Treasury reported in parliament this week that the national carrier was no longer technically insolvent. Duh! Its debts were settled by the state in the business rescue process and it should naturally be a going concern.
However, questions remain about its future. The business rescue funding of R10.5bn was R3.5bn short. Godongwana has yet to fund the shortfall.
Failing to complete the process puts SAA at risk of slipping into the difficulties of the past, as it wallows between the rescue process and new ownership. Its competition will pick up market share in this period of confusion.
It may be a complicated market when the airline lands in its new world, under the joint ownership of the Takatso consortium and the government.
Many justifiably believe the SAA revival is unnecessary and that the government should have walked away from the business in 2019 by liquidating it.
Governments make bad decisions all the time, and this was one of them. What is criminal, though, is the failure to conclude a process as minuscule as the last stage of the SAA deal.
If the government takes four years to finance the outstanding R3.5bn in the restructuring bill, it tells you how long it will take to handle Eskom's financial mess, which is 100 times worse.
Godongwana promised last year he would, in this week's budget statement, announce how much of Eskom's debt the state would take over. We are still in the early stages of determining the quantum, not the when and how.
He has resisted revealing how much he is prepared to take onto the sovereign books as that information would encourage market speculators. He can't keep everyone guessing forever and has to give something this week. Part of his difficulty is the complexity of dealing with bondholders and their lawyers.
Meanwhile, Eskom's debt and financial position worsen by the day. According to the Treasury, Eskom ’s gross debt increased to R423.2bn in December, from R396.3bn in March, mainly due to a weakening rand against the dollar. It tells a story about the poor hedging at play, since the debt was accumulated when the rand was somewhat stronger against the dollar.
For Eskom to remain a going concern, the government must continuously inject equity. The power utility has already gobbled up 92% of the R350bn government guarantee available to it.
Without a bold and clear political shift, budget day is just another day in South Africa's continuing misery
What tough love, then, can the finance minister give? He has many other priorities, including the Land Bank, which has been calling for support for a while. Transnet is the new Eskom, and something has to be done to save a company whose operational and financial crises will throttle the parts of the economy that are surviving despite Eskom.
Godongwana's colleagues will expect him to fund the ANC's 2024 manifesto. He has to oil the welfarist machine that will help the party avert a massive electoral decline.
One of the ideas is the basic income grant. I am willing to bet my bottom dollar that the grant will be implemented in 2024. The time to signal is now, but I am not convinced the minister is in a position to do so yet. So, we will live with this question hanging in the air until the decision is made early in 2024.
How to fund it? Well, crafters of populist ideas never have to deal with such questions. And I guess Godongwana will have to “double cross” that bridge next year.
In the meantime, the fiscal framework continues to lose its shine and predictability. Budget watchers will have to get used to interrogating one financial year at a time instead of the three-year view that worked so well in the past.
The government and its companies practically live from hand to mouth. Even once good firms like Airports Company South Africa are drowning due to market changes and new aviation trends since the pandemic.
Without a bold and clear political shift, budget day is just another day in South Africa's continuing misery. While no significant defaults can be expected in the coming financial year, the government will have to honour the debt obligations of Eskom and Transnet. The debt headache means there is no room to fund anything else.
Godongwana will have to squirm and wriggle around the mouth of the hippo identified by his predecessor.
• Mkokeli is lead partner at public affairs firm Mkokeli Advisory
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