Rising debt of SOEs poses risk to SA’s economy: Commission

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The Financial and Fiscal Commission has warned that the increasing debt and poor financial health of State-Owned Entities (SOEs) are posing serious risks to the country’s economy.

It told Parliament that more government bailouts to major SOEs are projected due to their declining financial performance.

Senior researcher Thando Ngoza says rising debt of SOEs will in future require re-financing by government.

“What we have noticed is that the maturity of the SOEs debt presents a substantial risk to the fiscus. The figure on this slide shows that the SOEs’ debt will peak at R24 billion in 2025 and 2026. In 2026/27, debt repayment by SOEs will amount to R16 billion, more than half which is 55% will be guaranteed by government,” explains Ngoza.

The video below looks at the cost of running SOEs:

Government announces zero funding for SOEs

In February 2022, Finance Minister Enoch Godongwana said the future of SOEs will be determined by the value they create and whether they can function effectively without government bailouts.

Delivering his maiden Budget Speech in Cape Town, Godongwana announced zero funding for SOEs, adding that National Treasury is set to outline criteria for their funding during the 2023/2024 financial year.

The Treasury Ministry said government has emphasised the need for SOEs to develop and implement sustainable turnaround plans.