Eskom is the best example of an SOE wasting public funds, says economist Dawie Roodt.
Picture: Siphiwe Sibeko / Reuters
Eskom is the best example of an SOE wasting public funds, says economist Dawie Roodt.
Picture: Siphiwe Sibeko / Reuters

#Budget2017: Ailing SOEs continuing to be fed

By Sihle Manda Time of article published Feb 23, 2017

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Johannesburg - An economist has slated Pravin Gordhan for continuing to “feed” the country’s state-owned entities (SOEs).

In his Budget speech, Gordhan called for improved financial performances of SOEs with a strong balance sheet.

But he said SAA would need a new capital injection. He would not release details.

Director-general in the Treasury Lungisa Fuzile said this would be a substantial amount of money but they were still working out details.

SAA has received billions of rand in guarantees in the past few years.

Gordhan said reforms were needed to fix the SOEs that have been in serious trouble. He said he needed strong SOEs to jerk up the economy. “State-owned companies are governed by a strong legal framework, and cabinet has endorsed a series of measures to reinforce governance and accountability and clarify their development mandates.

“This imposes substantial obligations and responsibilities on boards and senior managers,” said Gordhan.

The government wanted SOEs to play a key role in growing the economy.

SAA suffered a financial loss of R5.6 billion in 2014/15 and another loss of R1.5 billion the following financial year.

The Treasury said it would continue to give financial support to the national carrier. SAA has in the past 15 years received total bailouts of R19.1 billion.

The government was also busy working on the merger of SAA with South African Express (SAX), and the introduction of an equity partner was still in progress.

President Jacob Zuma announced the merger of SAA with SAX in his State of the Nation Address last year. This was part of the plan to improve the balance sheet of the national carrier.

The Passenger Rail Agency of SA (Prasa) would receive more trains this year as part of its R53bn rolling stock fleet renewal programme.

A total of 70 trains would be delivered this year. Some have been delivered in the past two years, but questions have been raised about their quality.

The Prasa board has also gone to court to contest some of the contracts the previous executives of the agency entered into with some of the companies.

The Budget review said the SA Post Office was hoping to return to profit this financial year. Last year, it posted a loss of R1.14 billion, down from a loss of R1.5 billion in the previous year.

Economist Dawie Roodt described Gordhan’s speech as “horrible”. He said the minister had suggested the Treasury would “keep feeding the SOEs”.

“There was nothing new, SOEs will keep wasting public funds. Eskom is the best example. SAA is also an example. Billions of rand have been channelled to these entities just to rescue them,” Roodt said.

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