Cape Town – The country’s SOEs’ debt repayment will peak at R24bn in 2025-26, of which the government guarantee is 17%, or R4bn.
This is according to the Financial and Fiscal Commission, which this week briefed the public enterprises portfolio committee on the state of the SOEs failing under the Public Enterprises Department.
In its report to the committee, the department revealed that a total of R38.8bn was used by the entities to settle government guaranteed debt in the 2021-22 financial year.
An amount to the tune of R31.7bn was spent on Eskom, R4.1bn on South African Airways and R3.1bn on Denel.
Thando Ngozo, a researcher at the Financial and Fiscal Commission, said the government guarantees to SOEs were high and constituted a fiscal risk in the form of contingent liabilities.
The total government guarantee to all the SOEs increased from 12.2% of the GDP in 2019-20 to 12.4% in 2021-22.
Eskom’s government guarantees increased from 6.2% of the GDP to 6.3% during the same period.
Ngozo said the poor financial health of the SOEs meant that their debt would require refinancing.
“If refinancing is not possible, the government is obliged to make guarantees available,” he said.
The SOEs’ debt repayment will peak at R24bn in 2025-26, of which the government guarantee is 17% or R4bn.
The repayment would amount to R16bn with more than half the amount to be guaranteed by the government.
The SOE’s poor financial performance and reliance on government support adversely affected public finances and sovereign credit ratings, said Ngozo.
“South Africa’s sovereign credit rating downgrades in the main were attributed to unsustainable government expenditure commitments linked to the counter-cyclical fiscal policy stance and multiple requests for support from SOEs,” Ngozo said.
The challenges of SOEs have resulted in poor service delivery, poor financial management, less growth, massive unemployment, corruption and low business confidence.
Ngozo also noted that there were ineffective boards of directors and high turnover.
“Mandatory board training is required to ensure that boards understand and are effective in carrying out their roles and responsibilities,” he said.
Strengthening the role and performance of the SOEs was a key component of the developmental state agenda, he said.
“Governance and other reforms are critical to improving SOE performance and competitiveness, increasing financial sustainability through access to new sources of capital, and achieving higher levels of transparency and accountability,” Ngozo said.
Financial and Fiscal Commission’s researcher Siyanda Jonas said the SOEs have not contributed to economic growth as expected.
“SOEs’ performance has declined largely because of corruption, mismanagement, and technical inefficiencies.
“The poor performance of SOEs has resulted in greater risk and exposure to the national government and has adversely affected the economy,” he said.
Senior ANC MP Khaya Magaxa said this week that he did not think there was enough work or pressure being put on the National Treasury to guide or advise state-owned entities (SOEs) to improve their finances.
Magaxa, who is the chairperson of the public enterprises portfolio committee, said SOEs, despite corruption and malpractices, including state capture, had created a disaster, but the National Treasury was not immune.
“It is not like they have been holy in the process,” he said.
DA MP Ghaleb Cachalia said the upward trend in government guarantees and liabilities to high levels was worrying.
“We cannot continue in this space exponentially. It will impact us in ways we have never dreamt of,” Cachalia said.
Cape Times
