Budget Speech 2018Provincial and Local GovernmentState Owned Companies |
Madam Speaker,
State-owned companies operate network industries, such as electricity and transport, that underpin our country’s economic growth potential.
President Ramaphosa made an unequivocal commitment in the State of the Nation Address, to intervene decisively to stabilise and revitalise state owned enterprises and outlined in his response to the SONA drastic measures we are going to take to implement meaningful and far-reforms to our State-Owned Companies.
To date we have managed to:
| • | Secure Cabinet approval of frameworks on private-sector participation, the appointment of boards and the costing of developmental mandates |
| • | Appoint a new board, chief executive officer and restructuring officer at SAA, and to implement the long-term turnaround strategy for the entity. |
| • | Appoint a new board at Eskom. The Minister of Public Enterprises instructed the entity to conclude all power-purchase agreements with independent power producers. |
The 2017 Medium Term Budget Policy Statement warned that the liabilities of several state-owned companies were falling due, and without an improvement in cash flows and governance they would be unable to meet these obligations.
State-owned companies are expected to fund their own operations.
As our winning tipster – Luvo Mgxaji – wrote to us, it is not fair for taxpayer money to be used for continual bailouts, caused by operational inefficiency and financial mismanagement.
We agree with Luvo, we have limited fiscal room and are loathe to use it to subsidize inefficiency, rather than address social needs and invest to improve our economic competitiveness.
Government recognizes that the business models of some SOCs are unsustainable, and their capital structures too reliant on debt.
To confront these issues, we will assist them to develop and implement robust turnaround plans.
This needs to be part of a holistic reform programme which considers the role we want SOCs to play in our economic development.
Some will require restructuring with equity investment.
In the coming year, government may be required to provide financial support to several SOCs which could be done through a combination of disposing of non-core assets, strategic equity partners, or direct capital injections.
In this regard, a property audit conducted by the Department of Public Works shows that national government owns up to 195 000 properties, with an estimated value of over R40 billion.
We will work with them on a programme to better utilize or dispose of these properties in the short to medium term.
Government is finalising a framework on guarantees aimed at both reducing the exposure and improving the quality of the guarantee portfolio.
We can and will ensure that all SOCs are run sustainably and contribute to our national development.