SOEs ‘continuing to bleed money’
The government continues to spend billions bailing out stateowned enterprises (SOEs) while they “bleed money” and miss profit targets, the Treasury told the appropriations committee in parliament on Wednesday.
The losses that Land Bank, Eskom, arms maker Denel, SAA, the Post Office and Transnet accumulated in the first nine months of the 2023 financial year were detailed to the committee.
The Treasury has repeatedly committed to reducing state debt and stabilising borrowing.
It emerged during the hearings that Eskom, which is receiving a bailout of R265bn over three years, recorded a loss of R7.5bn in the nine months to the end of December.
Land Bank, which has defaulted on its debt since 2020, recorded a R97m loss in the same period, when it had budgeted to make a small profit.
The Post Office went from bad to worse despite being in business rescue, accumulating losses of just under R1bn from April to end-December.
SAA, which was also budgeted to make a profit, made a loss of R776m in the same period. The group’s revenue of R4.4bn was 26% less than budget.
Treasury said the budget performance of SAA can be attributed to delays in the implementation of a plan to double the number of planes over a year and increase the number of flights and destinations.
Denel, which was given a R3.3bn bailout in 2022, lost R463m at the end of the nine months, against a budgeted loss of R339m.
“The government needs to accept that state-owned enterprises are now in a death spiral due to the long-term impacts of mismanagement and cadre deployment. The endless bailout strategy has failed,” DA spokesperson on finance Ashor Sarupen said of the report.
Among the most dire updates was that of Transnet.
The Treasury said Transnet has R130bn in debt, up from R110bn in 2015, and was unable to repay R14bn of that due at the end of March. Also, due to the way its debt was structured, the Treasury said if Transnet missed repayments of debt as they fell due, it would be seen to have defaulted on all its debt, and lenders could demand repayment of other debts sooner than initially arranged.
“A default on any maturing debt would result in a default on the entire debt portfolio of R130bn due to cross-default clauses.”
The Treasury provided R47bn in debt guarantees in November and added a list of requirements Transnet must meet — such as explaining how it will spend money it receives.
The presentation also revealed that Eskom, having already received R44bn, is going to be charged interest on its debt relief package.
The Treasury said: “The key principles in designing the interest scheme included ensuring that the interest charged does not negatively impact Eskom’s cash flows, the terms and conditions do not impose huge administrative burdens on Eskom and National Treasury, and that the interest charged is in line with market-related loans.”
The Treasury also detailed problems at Land Bank, which has debts unpaid since April 2020. It also has R9.7bn in nonperforming loans from customers, meaning these were unlikely to be repaid.
Sarupen said: “The DA’s longstanding opposition to these indiscriminate bailouts is based on the fact that these bailouts divert funds that should be used to supplement hard-pressed services such as healthcare, education and policing.”