Government to get tough on SOEs wanting bailouts

The government has resolved to tighten rules around the granting of loan guarantees to financially struggling stateowned companies (SOEs).

It also intends to effectively put them under administration each time they request a loan guarantee from the National Treasury.

Finance minister Tito Mboweni announced that a chief reorganisation officer would be appointed to a parastatal whenever it received a loanguarantee.

Mboweni said the government was reviewing its framework for SOE support and had revised the contingency reserve upwards of R13bn to respond to possible requests for financial support from cashstrapped entities such as SA Airways and the SABC.

“We must tighten the guarantee rules. If a state-owned enterprise applies for a government guarantee for operational purposes‚ it will be required to appoint a [chief reorganisation officer] with National Treasury and its bondholders.

“The chief reorganisation officer will undertake a full operational and financial review.

“When banks need state support‚ we appoint a curator.

“When provincial and municipal finances are in disarray‚ government can take over the running of the administration.

“These rules should also apply to all SOEs‚” Mboweni said.

At a media briefing prior to presenting the budget to MPs‚ Mboweni relayed how, when he served on the board of cement maker PPC‚ when it experienced financial difficulties‚ the banks “literally took away the keys from us” and imposed a chief restructuring officer.

“So that’s what we are going to do,” he said.

“We will now be installing a chief restructuring officer that in the speech we call a chief reorganisation officer to be our ears and eyes inside every state-owned enterprise that we are going to provide cash for.

“We can’t just be providing cash to SOEs and stay back and hope things are going to work.

“Basically we are going to put them under curatorship‚ that’s how you do things.

“You show your determination to resolve problems, that you are not just a bank but you want to look after every rand and cent that you provide.”

Mboweni said the cabinet was considering a proposal to end the issuing of guarantees for operational purposes.

He said the expiry dates on guarantees would also be strictly enforced.

“As the president announced‚ strategic equity partners will be found where possible‚” Mboweni said.

In his speech‚ Mboweni said the SOEs posed serious risks to the country’s finances.

He said that funding requests from SAA‚ SABC‚ Denel‚ Eskom and other financially challenged SOEs had increased‚ with several requesting state support just to continue operating. –