Picture: Mark Wessels/SAPA
The National Treasury has warned that state-owned entities remain a risk to the economy with the entities owing creditors billions of rand.

In the report on the financial statements of national departments and SOEs tabled in Parliament on Friday, the Treasury said the government must get the SOEs on the right track before damage was done to the economy.

The government has issued guarantees amounting to R670 billion to SOEs and most of the guarantees have been used up.

The Treasury report came in the week that Eskom admitted in the public hearings on electricity hikes in Cape Town that it was expecting to suffer a loss of R15bn this year.

This will be one of the biggest losses of SOEs in the country after PetroSA incurred a similar loss of R15bn four years ago, prompting a probe in Parliament.

In the financial statements, the Treasury warned about the state of SOEs which are laden with debt. It said most of them were not efficiently run.

“Furthermore, the profitability of SOEs has declined due to a combination of operational inefficiencies, governance failures and weak demand.

“These factors have increased reliance on borrowing to fund operations, leaving several entities heavily indebted without sufficient cash to service their debt obligations or even to run their operations,” said the report.

“Significant risks remain to economic and fiscal projections,” it added.

The report stated that this was a serious exposure for the government because if SOEs failed to settle the debt, creditors would call in their loans.

The government would not have the money to settle this amount.

In the section of the report of the auditor-general, Kimi Makwetu, on the National Treasury financial statements, Makwetu warns of irregular expenditure at the SABC, Eskom and the Passenger Rail Agency of South Africa.

Makwetu said there was lack of internal controls in these entities.

He said the SABC did not include all the information required in the irregular expenditure. The SABC’s irregular expenditure was sitting at R5bn. At Eskom the irregular expenditure was R20bn. However, the National Treasury also cautioned on the bailouts that SOEs receive.

SAA has received almost R20bn in guarantees in the last few years. A few weeks ago the national carrier confirmed that it had received a loan of R3.5bn to keep it afloat until the end of the current financial year in March.

SAA needs a total of R21.7bn for the next two years to be able to stay in business, but some parties in Parliament want it to be sold to a private sector partner.

The ANC has rejected calls for SAA to be privatised.

The Treasury said in the report more guarantees were given to state arms manufacturer Denel and South African Express. “As disclosed government issued a R1bn guarantee to Denel which increased government guarantees to the entity to R3.43bn.

“By the end of September all the guarantees matured and a new guarantee of R3.43bn for a five-year term was issued,” said the report.

“The South African Express also received a guarantee amounting to R1.74bn after the SA Civil Aviation Authority had suspended the airline’s air operator certificate and Aircraft Maintenance Organisation licence, which effectively grounded the airline,” stated the report.

Sunday Independent