Govt to rein in State-Owned Enterprises

Government has promised to rein in State -Owned Enterprises (SOEs).

Delivering his 2018 Budget in Parliament, Finance Minister Malusi Gigaba says they expect SOEs to fund their own operations.

In 2017, the minister said he was concerned with the high debt levels of several State-Owned companies which were cash strapped.

The minister has warned that without an improvement in cash flows and governance, many SOEs would be unable to fulfill their obligations.

In the coming year, government says it will have to continue to provide financial support to several SOEs. They plan to provide assistance through a combination of disposing off non- core assets, partial privatisation or direct capital injections.

The new administration says it will continue to fulfill its commitments to stabilize SOEs.

The Finance Minister says they will further implement drastic measures and reforms to State-Owned Companies.

“There will be SOEs that will still need support from government. There are ongoing discussions about what is the quantum and all of that, but we have made preparations for that. SAA, we had committed to recapitalising it to the tune of about R13 billion. A number of them SA Express and Denel, we do make provisions. Any spending on State-Owned Companies will be done in a budget natural way and we will have to find resources probably through the sale of assets,” says Gigaba.

Director General at Treasury, Dondo Magojane says, “Government has 195 000 properties that are in prime locations. We want to unlock the value of up to R40 billion, but ask yourselves the reason why we said we will dissolve some of Telkom shares at the time. We wanted to fund any recapitalisation. So, as I am saying, our options are open and have been in an intensive drive by government over the last few months. The work that we are focusing right now to the long and medium term is the 195 000 that can unlock R40 billion worth of value.”

Government says it recognises that the business models of some SOEs are unsustainable and heavily reliant on debt.

“We are going to review the guarantee framework and we provide guarantees, not for operational expenditures, but for capital expenditure in the case where this is required. I have regularly raised concerns about the financial sustainability of our State-Owned Companies – the fact that State-Owned Companies in large merger are financially unsustainable. Their funding and operational models are inadequate. So, we need to take drastic decisions that will improve that situation.”

Gigaba says they plan to implement robust turnaround plans to get SOEs back on their feet. They will also be appointing new board members at some strategic parastatals

“The announcement of boards will be done once the president takes full charge of State-Owned Companies coordinating council. Denel board is next in line for review so we should have a new board for Denel announced in a short space of time. SA Express will need a review given the fact that we are moving ahead to consolidate our aviation assets.”

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