Let Mboweni clear the decks
Everything is going wrong all at once for finance minister Tito Mboweni, who just months ago pledged to wean stateowned enterprises (SOEs) off government support. Just this week, three of them — Airports Company SA (Acsa), the Land Bank and arms manufacturer Denel — came out with statements saying their cash flows were getting wiped out by the lockdown.
If companies like Acsa and the Land Bank, which for years have been held up as examples of well-run, financially stable state companies, are holding up begging bowls, one gets an idea of how bad things must be for the normal problem children: the SABC, Denel, PetroSA and the SA Post Office.
Instead of throwing good money after bad, which it doesn’t have, SA’s rolling economic destruction should be the catalyst for President Cyril Ramaphosa’s government to acknowledge that it is hopeless at running businesses and step up the process of getting private partners to take charge of the strategic direction of some of these companies.
The Land Bank, the specialist lender to emerging and commercial farmers, is seeking a R22bn cash injection after skipping payments on some of its debt in April, triggering a cross-loan default on bonds worth R50bn and a frantic scramble to private lenders for more loans or requests to roll over maturing debt.
Creditors rightly refused to saddle the bank with more debt or extend the date on maturing loans but came to an arrangement under which the company will not be paying interest or capital payments for a few months while it looks for cash elsewhere to fix its lopsided balance sheet.
Inevitably, Ayanda Kanana, who took over as CEO in February after the bank had been left rudderless since December 2018, tapped the shareholder, the Treasury, to throw it a R22bn lifeline. The Land Bank fell into a R17m loss in 2019, a wild swing from a profit of almost R170m the year before.
While the reasons for Acsa, whose clients such as Comair are fighting for survival, joining the line-up of companies seeking government bailouts are understandable, Denel’s financial problems predate the economic contagion. Earlier this week, staff were told that they won’t be getting salaries for May and that their pay for the two months after that was in “serious jeopardy”.
In the middle of all this, Pravin Gordhan, the minister in charge of SOEs, reckons we should build another airline to replace SAA, which has been in a long overdue business rescue since December 2019. Why does the government need to own and operate an airline? We have asked this question many times and each time there’s been no strategic developmental merits for it.
In a parliamentary briefing during which Kanana laid out the gravity of the Land Bank’s liquidity crunch, Tshepiso Moahloli, the acting deputy-director for assets and liabilities at the Treasury, told MPs that Mboweni had indicated that there was a need to revisit the idea of the Land Bank as a 100% state-owned company.
There will be some who say giving private investors strategic control of SOEs would undermine the government’s developmental agenda, but the track record of SOEs shows the opposite: they have themselves actively sabotaged the agenda through corruption. If we have profit-hungry investors running some of these SOEs, the government would get both the dividends and taxes to support its social and developmental goals.
The debate is almost academic in light of the government’s dire finances. Even before the Covid-19 outbreak, when we thought the government was set for a budget deficit of just below 7%, credit ratings companies were already warning that SA could not go on bailing out failing SOEs. Since the onset of the pandemic, with SA facing a double-digit contraction in GDP, a deficit in the region of 13% and potential aid from the International Monetary Fund, the need for urgency has never been more acute.
It is time for Mboweni’s detractors in the ANC to stop fighting him and instead heed his call.
IN THE MIDDLE OF ALL THIS, PRAVIN GORDHAN RECKONS WE SHOULD BUILD ANOTHER AIRLINE