Parastatal projects set to cost R404bn

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IOL pic feb27 rsa bank notes Reuters File photo: Siphiwe Sibeko

Johannesburg - State-owned enterprises (SOEs) will account for R404.5 billion of public capital expenditure in the next three fiscal years. Expenditure on public sector infrastructure as a whole is projected to reach R847.3bn in the years to 2016/17. In the past five years, it amounted to R1 trillion.

Capital expenditure by major SOEs will account for R381.9bn of the parastatals’ share in the infrastructure bill, with Transnet, Eskom and the SA National Roads Agency accounting for 90 percent of this amount. Transnet’s capital expenditure will overtake Eskom’s for the first time by 2016/17 as the power utility’s expenditure plans have been scaled down for the medium-term period.

Eskom’s next coal power station, dubbed Coal 3, has not even made it into Treasury’s Budget, perhaps signalling that the government is taking seriously the recommendations made in the updated version of the Integrated Resource Plan (IRP) in December last year.

The latest IRP advised that Coal 3 be pursued as a procurement programme for several plants, rather than as a mega-scale station similar to Medupi or Kusile.

But the National Treasury’s director-general, Lungisa Fuzile, said this was just a matter of following processes. “We have to be meticulous in dealing with infrastructure projects… Projects would have to go through different stages before they appear in the Budget.”

There was no mention of what stage of this process Coal 3 was at.

Gordhan said it was clear that electricity supply challenges on Eskom’s part had been a constraint on growth and the delay in commissioning the Medupi power station was “unfortunate”.

But even though Eskom’s capital expenditure has been revised downwards as the utility has projected lower revenue generation in the medium term, public sector energy infrastructure will still make up the second biggest proportion at R188.4bn. Transport and logistics will have the biggest infrastructure expenditure at R347.1bn over the next three fiscal years.

There has been an encouraging improvement in SOEs’ spending of their budgeted capital expenditure. In the 2012/13 financial year, they spent 79.9 percent of their budgets compared with 70 percent in 2011/12.

Turning to SAA, which told Parliament last week that it was in discussions with the Treasury about closing a financial gap that existed in its balance sheet, Gordhan said the airline was still under a review process to determine if its new long-term turnaround strategy was a viable one.

The Minister of Public Enterprises, Malusi Gigaba, was leading that process.

In the booklet of national expenditure estimates, the Treasury said it would lead the formulation of policies that would create sustainability for airlines SAA and SA Express.

Economic regulation and competition policies would be developed in the medium term to ensure that SOEs are able to achieve their strategic objectives, it added. - Business Report

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