Poor management at Eskom‚ South African Airways (SAA)‚ the South African Post Office‚ state railway operator Prasa and the South African National Road Agency (Sanral) has cost South Africans dearly and placed strain on the economy‚ the Treasury has admitted.
In supporting documentation to the medium-term budget policy statement delivered by Finance Minister Pravin Gordhan in Parliament‚ the Treasury stated that these state-owned companies "could pose risks" to the country’s public finances.
Further key interventions were foreseen‚ especially in the cases of the SAA‚ the Post Office‚ Sanral and Eskom.
SAA gets no praise from the Treasury. Its new board simply gets tasked with returning the airline to financial sustainability and filling vacant management positions. No progress in this regard is recorded.
The Post Office board is complimented on raising money to repay creditors and reducing strikes.
Sanral’s new tolling dispensation‚ and those not paying e-tolls‚ stand forewarned that they will face legal action. The Treasury is closely monitoring the way in which Sanral is being managed.
The Treasury believes Eskom’s recapitalisation process has improved both its liquidity and profitability. At the same time‚ Eskom accounts for almost three-quarters of contingent liability costs accruing to government from poorly managed state-owned companies‚ the power producer having built up exposure of more than R200bn.
Most of this exposure is due to the obligation on Eskom to buy power from independent power producers for the next 20 years. Should the power utility fail to do so‚ the state must step in and honour the commitment somehow.
The fiscus has committed R53bn to Prasa‚ mostly to buy new rolling stock (trains). Weak expenditure controls and contract management has, however, meant that the programme was unlikely to be finalised on time and within budget.
Furthermore‚ expected declines in Prasa’s fare revenue and passenger numbers were reasons for concern.
Fiscal exposure to Sanral debt reached R35bn‚ fuelled by the public’s refusal to pay e-tolls. The Treasury was clear that refusal to pay e-tolls would lead to a deterioration in roads.
SAA continued to post losses. Without continued state bail-outs at the taxpayers’ expense‚ SAA was technically insolvent.
The Post Office had exposed the state to the tune of R4.4bn‚ but was improving.
The Land Bank and the Road Accident Fund also remain poorly managed.
State-owned companies would struggle to be bailed out in future. It would happen only where it was "consistent with sustainable public finances".
Capitalisation would not be done in a way that would increase the budget deficit‚ and further bail-outs would be granted only where there were sound business plans‚ the Treasury said.
TMG Digital
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.