National Treasury director-general Dondo Mogajane. Picture: Phando Jikelo/African News Agency(ANA)
National Treasury director-general Dondo Mogajane. Picture: Phando Jikelo/African News Agency(ANA)

Treasury warns of ballooning debt, high cost of bailing out ailing SOEs

By Siyabonga Mkhwanazi Time of article published Jul 27, 2019

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Cape Town - The National Treasury has warned that the escalating debt and the bailouts of state-owned entities (SOEs) is putting pressure on the fiscus.

Director-General in the National Treasury Dondo Mogajane told MPs the fiscus was under severe strain and the billions given to SOEs were affecting the public purse.

The government has spent billions of rand to rescue Eskom, the SABC, Denel and SAA. Finance Minister Tito Mboweni announced that they would appoint chief restructuring officers in these entities that had been given billions of rand in bailouts.

Mogajane said the government had been struggling to stabilise debt and was paying more than R200 billion in service costs.

“In stabilising debt and deficit there are other factors.

“I will talk about other deteriorating factors in the SOEs putting pressure on the fiscus,” Mogajane told members of the standing committee on appropriations in the National Council of Provinces.

“Weak economic performance and residual problems in tax administration have resulted in revenue shortfalls.

“The deteriorating financial position of SOEs has put additional pressure on the public finances,” said Mogajane.

The government debt was close to 60% of the GDP.

Steve Swart of the ACDP later told the National Assembly, during the national budget debate, that the fact that the debt was sitting at R3trillion was alarming.

In the appropriations committee, Mogajane said they would continue to support SOEs to raise revenue by selling non-core assets.

However, the SOEs must identify these assets to be sold and then proceed to raise revenue.

Eskom alone is taking a big slice of the cake as it is sitting on huge debt. The power utility has for some time been a fiscal risk.

The Treasury and President Cyril Ramaphosa have said they need to save Eskom at all costs to avoid its collapse, as it would impact on the economy. Mogajane said one of the measures they had taken to keep spending low was to cut allocations to departments and entities.

The government would save a lot of money from this. The state has warned that only critical posts will be considered in any department in order to ensure the financial sustainability of the government. Mogajane said they had to dip into the contingency reserves to help struggling SOEs.

But Mboweni has said the entities will not get billions without any checks and balances. The government has over the last few years spent billions on the bailout of state entities.

Political Bureau

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