#Budget2016 / Johannesburg - Finance Minister Pravin Gordhan has reined in state-owned entities (SOEs), calling for an end to their bailouts and shutting down some of the non-performing SOEs.
Gordhan said the troubled SAA would have to merge with SA Express and find a minority equity partner.
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He said the government had spent billions of rands in guarantees on SOEs in the last few years, noting that the R467 billion in guarantees to SOEs was too much for the government.
“This cannot be allowed to continue forever,” he said.
In the Budget Review document, the Treasury said SAA was expected to post huge losses for 2014/15. The national carrier has asked Parliament twice to postpone the submission of its audited annual financial statements.
Gordhan reiterated President Jacob Zuma’s stance in the State of the Nation address two weeks ago that some of the non-performing SOEs would be shut down.
The move is line with the recommendations of the Presidential Review Commission, which was chaired by Riah Phiyega before she was appointed to head the police in July 2012.
Redirected
Gordhan said the money saved from SOEs that had been closed down would be redirected to the balance sheets of the performing entities for them to grow.
“It seems clear, furthermore, that we do not need to be invested in four airline businesses. Minister Lynne Brown (of Public Enterprises) and I have agreed to explore the possible merger of SAA and SA Express, under a strengthened board, with a view to engaging with a potential minority equity partner, and to create a bigger and more operationally efficient airline,” the finance minister said.
The government has in the past spent more than R467bn in state guarantees on SOEs, which is 11.5 percent of the gross domestic product.
“This is a source of pressure on the sovereign rating,” Gordhan said.
The Budget Review document said that the SA Post Office (Sapo) was in serious trouble as well.
“Sapo recorded a net loss of R1.5bn in 2014/15 after a net loss of R422 million a year earlier,” it said.
“This was higher than expected, primarily due to declining revenue as a result of lower mail volumes, a loss of key customers due to strike action and the poor performance of its courier business,” the document said.
Gordhan added that most of the SOEs were in financial distress. However, the government wanted the SOEs to start performing.
The implementation of the Presidential Review Commission recommendations would put SOEs into shape.
“State-owned companies need to generate sufficient returns to contribute strategically to development without draining national resources,” the document said.
It added that six of the largest SOEs budgeted to borrow R84bn, but the actual borrowing rose to R91bn “as companies implemented their programmes more quickly than planned”.
It added that these six SOEs projected to borrow R257bn for capital expenditure programmes between 2016/17 and 2018/19.
Gordhan called on SOEs to partner with the private sector to strengthen their balance sheets. The finance minister added that the strength of the SOEs did not lie in protecting their dominant position in the market, but with the private sector.
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