Prescribed assets will threaten pension savings

By Janice Roberts

The following speech was delivered in Parliament’s Debate on Prescribed Assets yesterday by the DA’s Geordin Hill-Lewis. 

State-owned enterprises (SOEs) pose a “very serious risk” to the fiscus, Finance Minister Tito Mboweni said.

Allow me to quote from a section of the budget speech delivered earlier this year: “Funding requests for SAA, SABC, Denel, Eskom and other financially challenged state-owned enterprises have increased, with several requesting state support just to continue operating”.

Isn’t it about time the country asks the question: “Do we still need these enterprises?’” Mboweni asked the National Assembly.

Government guarantees to state companies are at more than R450 billion ($36 billion), according to data from the National Treasury. The state’s exposure to this, increased to 64.5 % in the past fiscal year, from 54.4 % as companies drew on the guarantees.

According to a statement made by the South African Reserve Bank: “Financial stability centers around the ability of state-owned enterprises to roll over debt and achieve financial consolidation, Should state-owned enterprises fail to roll over debt, the government would be liable and might not be able to honour such debt.”

The Minister of Public Enterprises, Pravin Gordhan’s announcement in Parliament in June this year that a ‘lender’ would pay the remaining 15% of salaries, following revelations that Denel was only able to pay  85% of salaries to its staff for the month of June, was merely a temporary bandage for an entity that is on the brink of collapse.

This unidentified lender, is not a ‘get-out-of-jail-free-card’ but a temporary reprieve.

Today, Eskom Chairperson, Mr Jabu Mabuza told the Standing Committee on Appropriations that we must, and I quote “pray for luck to keep the lights on”. This from an entity that has been hollowed out by State Capture and has a debt of over R440 billion and counting.

South Africa has hundreds of SOEs, many of them are either completely dysfunctional, bankrupt, or frankly serve no purpose other than lining the pockets of the connected few. Many of the hundreds of SOEs also duplicate functions and should simply not exist in the first place. They are sucking money from the fiscus and pose a great threat to the South African economy. From bailouts to guarantees. Here is a frightening look at what SOE’s financial situation is:

  • South African Airways debt: R21.7 Billion
  • Denel’s debt: R3 Billion with two bonds due in September totalling R2.7 Billion
  • Eskom debt: R440.610 Billion

State Owned Entities are archaic in their design and they should not be being used for economic development, it does not work. The economy should be growing through supporting a free market system which gives South Africans choice, which gives South Africans opportunity and creates a conducive environment for national and international investment.

When the money is finished, it is finished. It is very easy for Billionaires to make statements that the Government Employees pension fund is taxpayers’ money anyway.  3.5 million South Africans have worked their whole lives as civil servants and now face the risk of destitution in their old age.

It is very easy to be a socialist with other people’s money.  It is very easy to have communist leanings when you have millions of other people’s Rands to play with.  The fact of the matter is this, it is our job to be the custodians of the South African coffers.  Simple economics dictate that you cannot spend more than you have without dire consequences.

You cannot grow an economy when you are held ransom by unions who cripple SOEs when they feel their demands are not met. You cannot grow the economy when your energy supply is not completely secure, and you cannot grow the economy by pouring billions and billions of Rands into failing entities.

South Africans are literally starving for change. 10 million South Africans are unemployed. South Africans do not have homes, water, electricity, basic services, our schooling system is rated as one of the worst in the world, our crime rate is out of control, we have proved, beyond reasonable doubt, that State Capture happened and in many instances is still happening…but we expect South Africans to fork out billions and billions of Rands to bailout these failing entities. It is an absolute disgrace and is simply not condonable, no matter what your political ideology is, nor what your political background is – government has risked billions on unproductive and inefficient parastatals.

Now is not the time to throw money at the problem, now is the time to trim the fat. We cannot afford to continue with the status quo, where a government spends billions on bailing out SOE’s instead of spending money on job creation initiatives and service delivery.

It is time to be pragmatic, and to stop playing politics. SOEs represent some of the biggest monopolies in the South African economy, and by conducting a comprehensive review, government would be providing citizens with a clear indication that they are willing to start the process of structural change to protect our economy from further financial losses.

We cannot be sentimental about SOEs when they add little to no value to the people of South Africa and the economy. The country is in crisis, it therefore requires urgent reforms, and the absolute protection from having pension funds looted in a new structure of State Capture.

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