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Enoch Godongwana: I am still pushing ’tough love’ on SOEs

The finance minister said other than Eskom there was no provision made for any other entity. File picture: Kim Ludbrook/EPA

The finance minister said other than Eskom there was no provision made for any other entity. File picture: Kim Ludbrook/EPA

Published Feb 23, 2022

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Cape Town - Finance Minister Enoch Godongwana has highlighted the tough road ahead for State-Owned Entities, saying they will only get bailouts if they meet the tough conditions laid down.

He said he was still practising tough love for SOEs, but they would not be treated in the same manner.

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The government had raised concern their balance sheets had deteriorated and they had not been able to generate cash.

Godongwana said other than Eskom there was no provision made for any other entity.

“Other than the commitment we made in the Medium Term Budget Policy Statement on Eskom, no other commitment is made.

“It does not mean they will not be funded. You have to meet certain conditions. I am negotiating with them the tough conditions because people must move out of dependence from the state,” said Godongwana.

READ THE FULL BUDGET SPEECH

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He said with Eskom the situation was not avoidable.

But each SOE would not be treated in the same way when they want bailouts.

“Everybody will have to come to the queue and demonstrate you are a good child,” said Godongwana, adding they had spent R290 billion in the past 13 years trying to fix Eskom rather than electricity.

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The Presidential SOE Council was looking at the question of State entities, he said.

One of the questions was to merge some of the entities and close down those not financially viable.

“The future of our state-owned companies is under consideration by the Presidential State-Owned Enterprises Council. Their future will be informed by the value they create and whether they can be run as sustainable entities without bailouts from the fiscus.

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“Some state-owned companies will be retained, while others will be rationalised or consolidated. To reduce their continuing demands on South Africa’s public resources, the National Treasury will outline the criteria for government funding of state‐owned companies during the upcoming financial year,” said Godongwana.

The government has over the past two years raised the issue of poor financial performances of some of the SOEs. It said this would need to be done after a proper evaluation of all state entities and their requirements.

It said some of the entities were not financially viable and cannot continue to function properly and generate revenue.

It has said the merger or closure of some of them would be determined by their financial position.

In the budget review it said some of the SOEs have not been able to generate revenue.

“The financial position of major state-owned companies remains under pressure. (There has been a) sharp decline in their ability to generate returns,” stated the budget review.

“In 2020/21 most of these companies deferred their capital investment projects to preserve cash to meet short-term obligations. This resulted in a 6.2% decline in their consolidated asset base.

“Supplemented by government equity injections, total liabilities, consisting mainly of borrowings, decreased by 11.2%, reaching R853.4 billion in 2020/21 .

“Consequently, the higher reduction in liabilities resulted in a 7.4% increase in net asset value,” stated the budget review.

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Political Bureau

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