Budget 2022 | Treasury puts struggling SOEs on notice
Discussions are taking place over restructuring the R450bn owed by Eskom, which might see part of the entity’s debt burden moving to the state.
In a briefing to journalists shortly before delivering his budget speech, finance minister Enoch Godongwana said Treasury’s asset liability management unit had concluded that there was some debt that Eskom will not be able to repay which would require the state to intervene.
“If you look at the structure of Eskom debt there’s what they call distressed debt which, whether you like it or not, Eskom will never be able to repay. Some fiscal intervention will probably be necessary, but let’s see some action from Eskom’s side. Let’s see their turnaround plans, efficiencies, let’s see them selling assets,” Gondongwana said.
Money raised from the sale of Eskom assets will have to be committed to settling some of the debt, he said.
Minister of finance Enoch Godongwana delivered his first budget speech in parliament today. In a press conference held before the event, he said state owned entities would have to justify requests for funding before treasury would make money available.
Eskom is drawing on the remainder of its R350bn guarantee committed in 2008. The finance minister lamented that Eskom’s performance had not improved from when it first received the guarantee until now.
Poorly performing state-owned companies have been put on notice by National Treasury which is seeking to reduce their reliance on public resources for bailouts.
The financial position of major state-owned companies remains under pressure, with Treasury warning that those remaining unsustainable might have to be sold.
“A number of these companies do not have sustainable business models and cannot continue to operate or honour their obligations without state support, draining scarce resources from social and economic programmes.”
The Presidential State Owned Enterprises Council – announced by President Cyril Ramaphosa in his state of the nation address – is developing a new approach to how government manages SOEs.
“Some will be retained while others may be disposed of or consolidated. The future of state-owned companies will be informed by the value they create and whether they can be run in a sustainable manner,” Treasury added.
Arms manufacturer Denel, which was hollowed out by state capture and has been struggling to pay employees and debtors, was allocated R3bn to cover interest payment on debt.
The Land Bank, another distressed state entity, receives an additional R5bn to reduce its R29bn debt burden.
SAA, whose majority stake is being sold to the Takatso Consortium, has not been allocated additional funds.
Would you like to comment on this article?
Register (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.