Cape Town - Key state companies and agencies that play a
pivotal role in driving the South African economy and distributing essential
services are in disarray, as a high turnover of senior management hobbles their
ability to take decisions and massive losses threaten their financial
viability.
The “perilous financial state” of some of the companies
may require government bailouts, BMI Research, a unit of Fitch Ratings, said in
a report. We “continue to see the severely weakened financial condition of
state-owned enterprises as a significant risk to the country’s fiscal health,”
it said.
These are some of the worst-affected institutions:
Eskom Holdings
The utility, which provides about 90 percent of South
Africa’s power, is struggling to match supply and demand. Eskom last year
stalled the sign-off of government-brokered deals to buy green power from
independent producers, which were contracted to develop plants after shortages
resulted in electricity cuts from 2008, saying it had spare capacity of its
own. When the government directed Eskom to conclude the accords, the utility
said it would close several old coal-fired plants and terminate agreements with
48 coal-transport companies -- an announcement that spurred truck drivers to
blockade roads in the capital, Pretoria.
An investigation, which was halted by the company, showed
some suppliers were favoured despite higher costs. Eskom has had an acting
chief executive officer since November when Brian Molefe resigned after being
implicated in a graft ombudsman’s report.
South African
Airways
The state carrier expects its annual loss to widen to R3.5
billion in the year through March 30, from R1.5 billion rand the year before.
SAA last turned a profit in fiscal 2011, has been surviving on government
guarantees and doesn’t expect to make a profit until 2021. The airline, which
is being run on a temporary basis by the head of its technical unit, is
recruiting a new CEO who will be its seventh acting or permanent head in as
many years.
The South African
Social Security Agency
The state welfare agency has been at the heart of a
controversy that’s threatened to interrupt the payment of welfare grants to
more than 17 million people. While the Constitutional Court ruled three years
ago that a contract Sassa issued to Net1 UEPS Technologies to distribute the
grants was invalid because tender rules weren’t followed, the agency failed to
appoint a replacement and couldn’t take on the job itself. On March 17, the
court castigated Sassa and said Net1 should continue distributing the monthly
stipends for another year to give the agency time to get its house in order.
PetroSA
The state oil and gas company lost 14.6 billion rand in
the year through March 2015, mainly because of a writedown on its offshore
Ikhwezi natural gas project, and a further 1.1 billion rand impairment is
anticipated this financial year. PetroSA sees no let-up in its challenges for
at least the next three years. The company last had a permanent chief executive
officer in 2015.
The Passenger Rail
Agency of South Africa
The commuter rail service has lurched from one management
crisis to the next. Its CEO, Lucky Montana, was fired in 2015 after a clash
with the board, which accused management of concluding a number of irregular contracts
worth billions of rand and asked the High Court to annul them. Acting CEO
Collins Letsoalo was fired last month, following media reports that he gave
himself a 350 percent salary increase. Transport Minister Dipuo Peters fired
the entire board on March 3, saying it had failed to exercise adequate
oversight.
The South African
Broadcasting Corporation
The state broadcaster’s entire board quit last
year after parliament instituted an inquiry into its conduct following a
series of scandals, management blunders and legal disputes. An internal report
shows the entity risks running out of cash. The SABC hasn’t had a permanent
chief executive since 2015. The nation’s graft ombudsman found that the
former chief operating officer, Hlaudi Motsoeneng, lied about his qualifications
and the High Court barred him from working at the broadcaster.