The national treasury was “tired of being dragged into crises by those we employ to govern and manage state owned enterprises”, says Finance Minister Malusi Gigaba has said in his medium term budget policy statement speech. He believes that government has taken the right steps to correct this problem. One of the steps was bringing a strategic equity partner into SAA. It is the first haltering step in the direction of privatisation. The second is a sale of a portion of state Telkom’s stake
There are some good state owned enterprises (SOEs) says Gigaba. They include the Development Bank of South Africa, the Airports Company of South Africa and the Land Bank. They were role models for the rest.
The first was a leading institution on the continent in infrastructure provision – particularly at the local government level, said Gigaba.
In his speech he said that ACA had rolled out world class airport infrastructure “which has helped position our country as a dynamic regional business and tourism hub”.
The Land Bank, said Gigaba, was playing a key role in supporting emerging farmers.
This was proof that SOEs could perform well. “Government can manage SOCs well, and will act decisively to stabilize those which are experiencing challenges”.
The trend of SOCs seeking bailout to finance operational expenditure, inefficiency and waste “must be brought to an end”.
At the troubled South African Airways, the state owned airline, government would pronounce “on our plans to consolidate aviation assets and bring in a strategic equity partner”.
“We believe a strategic equity partner can play an important role in SAA’s turnaround, as well as unlocking value for the fiscus which has invested significantly in the airline over the years,” he said in the budget speech.
Gigaba admitted that Eskom had become “a significant risk to the entire economy”. But the government would not – he promised – allow it to fail. “We will not allow it to,” he said in his Budget speech.
He promised a new board would be appointed for Eskom “before the end of November”.
“Recent years have seen several worrying developments with regard to state-owned companies, with worrying trends of governance failures, corruption, operational inefficiency and the need for government bailouts,” he said.
State-owned companies “are developing a poor reputation with the public at large and have become a major fiscal risk to the country due to government guarantees of their debt.
Eskom enjoys a government guarantee of R350 billion.
He reported that a team from National Treasury “with the necessary expertise” will work closely with the Department of Public Enterprises to address the governance, management and financial management challenges at Eskom and report back periodically.
He said government would also ensure that a credible executive management team was put in place.
He reported in the budget speech that R13.7 billion had been raised – largely from the use of the contingency reserve – for SAA and the South African Post Office.
Government, however, was keen to avoid a breach of the expenditure ceiling this year “through the disposal of assets”. This was a clear reference to the passage in the speech later where he said that government planned to bring a strategic partner on board at the SAA.
He also said that “a portion” of government’s Telkom shares would be disposed of.
The director general of national treasury Dondo Mogajane said that about R900 million to R1 billion a year is raised in dividends by the Telkom stake. Thus the disposal of the Telkom equity would be considered carefully.
Gigaba said an asset list would be completed by March next year on what assets could be disposed in addition to Telkom and SAA. They could include some “non-core” assets as well, he pledged.