State arms manufacturer Denel continues to be mired in financial difficulty with National Treasury giving it R3 billion in bailouts in the current financial year.
But Finance Minister Enoch Godongwana yesterday warned that state-owned entities (SOEs) would not be given a blanket approach on bailouts, saying each case would be treated on its own merit.
He said for each entity that was given a bailout it was accompanied with tough conditions that have to be met.
It was not going to be business as usual as entities need to strengthen their balance sheets in the tough economic environment.
Godongwana said billions had been spent on SOEs on the past few years and they must show returns for it.
He said the government would need to ensure that entities that were funded showed value for money. Denel has in the past few years been struggling to stay afloat with government giving it bailouts.
In the budget review, it is stated Denel was given a bailout of R3bn because it could not meet its financial obligations.
“Denel cannot meet its obligations as they fall due. In the current financial year, government has allocated the military and aerospace equipment manufacturer R3bn through section 70(2((b) of the Public Finance Management Act to cover capital and interest payments on guaranteed debt. Broader alignment is required between the Department of Defence, the Department of Public Enterprises, the National Treasury and other relevant stakeholders to agree on Denel’s future. This will enable Denel to implement its strategic plan to consolidate operations, dispose of non-core assets and move ahead with identified strategic equity partnerships,” said the budget review.
In the Estimates of National Expenditure it is stated that the R3bn was used by Denel to meet its financial obligations.
But its poor liquidity makes it difficult for the company to fund its operational requirements.
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