Godongwana made allocations to struggling SOEs on the verge of financial distress

Finance Minister Enoch Godongwana has made allocations to some of the ailing State Owned Entities that he says are important enablers of economic growth but, are on the verge of financial distress and need an immediate cash injection.

Godongwana was delivering the Medium Term Budget Policy Statement in Parliament on Wednesday.

Godongwana has allocated a total of about R30 billion over the medium term to SANRAL, Transnet and Denel.

E-tolls

He’s addressed the issue of e-tolls, saying it’s now closed after remaining unsolved for years.  The national fiscus will now take over 70% of the E-toll-related debt while the Gauteng Provincial government will be responsible for 30% credit along with the maintenance of the physical infrastructure.

SANRAL’S debt is estimated at R47 billion.

Transnet will use its share of allocations to repair infrastructure severely damaged by the April floods and increase freight rail locomotives.

While Denel will use the cash injection to pay government-guarantee debt and complete its turnaround plan to be a viable entity.

Eskom 

This year’s Mid Term budget happens against the backdrop of rolling blackouts. The Minister has left those who were expecting him to give details on how Eskom’s debt woes will be fixed – disappointed. He says it’s due to the complexities and legalities involved.

Godongwana has also announced that the COVID-19 social relief of distress grant will be extended further until March 2024. He, however, says no decision has been made yet on how it would be financed.

The Minister says the government is collecting more revenue than anticipated. And that carbon tax rates will be increased significantly from next year onwards.

Godongwana described the policy statement as positive, saying it has not reduced the baseline of departments.

Infrastructure Spending

• Spending on building and other fixed structures is projected to increase from R66.7 billion in 2022/23 to R112.5 billion by 2025/26, at an annual average of 19% over the medium term.
• The projects recommended through the Budget Facility for Infrastructure at the national and provincial level amount to R4.8 billion in 2023/24, R5.8 billion in 2024/25 and R6.4 billion in 2025/26.
• Public entities plan to invest R145.8 billion in infrastructure over the MTEF period, including R85.3 billion in the transport sector and R33.3 billion in the water sector.

Finance Minister Enoch Godongwana’s 2022 Medium-Term Budget Policy Statement: 

Economic Growth Rate is too low

• South Africa’s economic growth levels remain low and insufficient to tackle high poverty and unemployment.
• The 2022 Budget projected economic growth of 2.1% this year. This has been revised down to 1.9%.
• GDP growth is expected to average 1.6% over the medium term.
• There is a need for rapid structural reforms to lift economic growth rate