Will the state-owned entities ever find their feet?
25 July 2019
The national electricity supplier, Eskom, has been operating in crisis mode for as long as any other State-owned enterprise (SOE) in South Africa, with the primary concern, of course, being its financial insecurity. On 23 July 2019, Finance Minister, Tito Mboweni, introduced the Special Appropriations Bill (the Bill) in the National Assembly. The succinct Bill details additional funding for Eskom - in terms of which Minister Mboweni will be able to approve a whopping R59 billion bailout for Eskom. The funds will be released in a R29 billion chunk for the 2019/2020 period, with the remainder following in the 2020/2021 financial year.
Much like Eskom, the South African Broadcasting Corporation (SABC) is in dire financial straits and is lugging around debt of almost R2 billion. Tito Mboweni has indicated, following a four-month period of uncertainty, that the SABC will be receiving its requested R3.2 billion cash injection, but not without conditions. In April, the SABC was given 11 conditions to meet before money could be released. Among the conditions were finalising of the Board, the removal of non-core and non-performing activities, maximising advertising revenues and clawing back expenditure on content. The initial refusal for the bailout was due to the Broadcaster failing to meet some of its obligations and presenting a business plan which Treasury did not consider strong enough.
Apart from a sound turnaround strategy (in the case of the SABC) and the appointment of Chief Restructuring Officers (CROs) at each of the concerned entities (Eskom, Denel and South African Airways), whose names will be announced imminently, it seems bailout conditions will be applied on a case-by-case basis. The CROs will be tasked with assessing and mitigating significant competitive, regulatory and technological threats to the SOEs’ capital and earnings.
In the case of the other embattled SOEs, very little detail is available as to what exactly these preconditions are. It is important that the public is made aware of these conditions.