Johannesburg - Finance Minister Pravin Gordhan has said the government will review smaller state-owned enterprises (SOEs), while setting bigger ones on the road to financial stability.
Addressing journalists on his recent post-Budget road show to the US and UK, Gordhan yesterday agitated for concrete action to stave off a ratings downgrade stating that the international rating agencies were watching South Africa’s every move.
Read: Ratings: Gordhan puts faith in 'fiscal discipline'
He said a review of smaller state-owned companies “especially at provinces” would eliminate duplications while allowing the government to address financial stability of “bigger” entities.
“The ideal state we want to get to in a few years’ time is that many of these companies operate on the strength of their own balance sheets,” he said.
Gordhan said during his road shows, investors had asked about the risk posed by state-owned enterprises.
He said the investors wanted to know the extent to which the state-owned entities were a burden on the fiscus.
“What risk do they pose?” Gordhan said.
The Treasury has previously said that a number of state-owned enterprises pose “significant short-term risks” to the fiscus.
Since his Budget speech, Gordhan has spoken about the review of state-owned companies, a move that could reverse the increasing reliance of many of them on government financial support.
Gordhan met more than 250 investors who collectively manage trillions of dollars in assets in the US and the UK.
He said some of the investors wanted to know what the government was going to do to maintain its fiscal consolidation process.
Downgrade
“The key message we come back with is that the world is watching South Africa very carefully,” Gordhan said.
South Africa faces the possibility of a downgrade to “junk” status by ratings agencies Standard & Poor’s and Fitch in June. “The next few months are critical as South Africa is expected to demonstrate concrete actions to map a path for higher economic growth as it seeks to preserve its investment grade rating and also demonstrate progress to address poverty, unemployment and inequality,” the Treasury said in a statement yesterday.
Telkom chairman Jabu Mabuza, who was part of the road show, said: “We are in a crisis. The downgrade will push us even further into a recession. We understand that there will be pain. There will be more pain if we get downgraded.”
As the risk of a ratings downgrade to junk status looms large, Gordhan has remained optimistic.
“We are not the worst in the world. And there lies our optimism,” Gordhan said.
He said South Africa had to back up its promises with action “and to provide very concrete evidence that we are not just talking. It is time for concrete action, demonstrable action.”
However, the finance minister has juggled efforts to inject investor confidence with political curve balls.
His spat with the commissioner SA Revenue Service’s (Sars), Tom Moyane, and the Hawks’ interest in his role in a so-called rogue unit at Sars have been widely publicised.
Gupta family
Responding to a question about his frosty relationship with Moyane, Gordhan said: “Moyane is not a minister. He is the equivalent of a head of administration. There is no equality between Moyane and a minister. The president has said that he has a process to deal with this issue. So let us give this a bit of time.”
Reports have also surfaced that Gordhan’s deputy, Mcebisi Jonas, was initially offered Gordhan’s job by the Gupta family in November. Jonas allegedly declined the “offer”.
Asked about Jonas’ encounter with the Guptas, Gordhan said: “I have no personal knowledge of this.”
He also said that he has never been invited to the Gupta homestead in Saxonwold. “I am a very quiet person. I stick to my corner.”
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