R200 billion in economic losses directly linked to Eskom and Transnet

7 November 2023

The DA notes with concern that operational deficiencies within Eskom and Transnet have inflicted a R200 billion loss on South Africa’s economy this fiscal year as confirmed by SARS Commissioner Edward Kieswetter. The medium-term budget policy statement (MTBPS), presented by Finance Minister Enoch Godongwana, echoed this sentiment in which a R56.8 billion revenue shortfall was projected. The shortfall can largely be attributed to subdued economic growth that is the consequence of a crumbling state-owned enterprise (SOE) sector.

The provisional October financing numbers, also released by Treasury last week, further underscore this distress. In stark contrast to October 2022’s R40.6 billion deficit, this October recorded an enormous R72.3 billion shortfall. This bears witness to the economic havoc wreaked by the dual scourges of persistent energy blackouts and a dysfunctional freight rail system. Both of these were identified by the Commissioner as primary drivers of continued revenue shortfalls.

Taking a cue from Eskom’s debt relief scheme, where a whopping R254 billion will be absorbed onto the national balance sheet, Transnet now wants the same. The entity has lobbied Government to absorb a large share of its debt burden. The DA forewarned that Eskom’s debt-takeover would establish a dangerous fiscal precedent as other unviable SOEs would come clamoring for taxpayer-funded relief. We remain opposed to the absorption of Eskom’s debt as it recklessly exposes taxpayers to the financial ramifications of governmental mismanagement. The same applies to Transnet and every other dysfunctional SOE.

In his MTBPS address Minister Godongwana's conceded that a shift towards leveraging private sector finance and expertise through Public-Private Partnerships (PPPs) is necessary. His concession is long overdue. Rather than indulging in this never-ending loop of fiscal irresponsibility, Government must own up to its shortcomings and implement substantive, reforms. Instead of persisting in a futile quest for more taxpayer money, Government must accelerate Eskom’s unbundling and Transnet's privatisation.

Exporters who have capacity should be given unconditional access to Transnet corridors to transport their products. Moreover, Government must immediately suspend bureaucratic hurdles, such as BBBEE and localisation criteria, in all procurement processes within Transnet. The business units under Transnet have no validity in central management and ownership. They must also be unbundled, and innovative public/private partnerships must be sought to own and run these as a precursor to privatisation.

Failure to promptly engage in meaningful privatisation and open the market to private investment will condemn South Africa to a perpetual low-growth cycle. Any inertia threatens any prospect of achieving economic stability and places the burden squarely on the shoulders of future generations. Government must act now to initiate the shift away from the unsustainable model of state dependent SOEs towards a robust, privatised, and competitively driven infrastructure landscape.

Issued by Dion George, DA Shadow Minister of Finance, 7 November 2023