Government cadres can’t run state companies

Responding to a written parliamentary Q&A in which he was asked about how much money was spent since the ANC came into power on 27 April 1994, finance minister Tito Mboweni has published updated data on how much money government has spent on bailouts for state-owned entities over the last 20 years.

“The total cumulative amount of money spent on state-owned entities (SOE) recapitalisations and bailouts from 2000/01 to 2019/20 is R187.4 billion,” he said.

“The information was derived from the ENE (Estimates of National Expenditure) databases for the years where the classification was clearly indicated and is thus, at this stage, not available from 27 April 1994.”

The finance minister said that National Treasury followed Standard Chart of Accounts (SCOA) economic classifications in compiling the data and focused on the classification for ‘payment of financial assets’, which excluded indemnities, guarantees and other contingent support provided to SOEs.

Regardless of this funding, financial information presented to parliament last week shows that a number of state companies are facing collapse without additional capital.

Eskom doesn’t generate enough cash to meet its costs and is surviving on government bailouts. Its debt pile stands at R454 billion, of which R300 billion is guaranteed by the government. Recently, Eskom was projecting a R20 billion loss for the 2020 financial year.

Arms manufacturer Denel logged another loss of R1.7 billion due to the significant decline in revenue collection. Its former chief executive said the group may not survive the next few months unless the government lets it use some promised bailout funds to generate revenue rather than repay debt.

Alexkor group will run out of cash reserves by September 2020 after its FY2019 losses amounted to R173.6 million.

South African Airways was placed under business rescue in December 2019, due to declining performance and its inability to pay its debts.

SA Express was placed under business rescue in February this year and was subsequently placed under provisional liquidation on 29 April 2020 by the High Court. According to the department, there is a likelihood that the airline may be liquidated on 30 September 2020 should there be no interest from any potential investor.

Other companies that will necessitate a financial rescue include the SA Post Office and the South African Broadcasting Corporation.

Despite government’s confusion and denial, it seems that the only remedy for the SOEs is to privatise them. The time is running out, however.

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