State-owned companies may pose risk to public finances

money-1Several state-owned companies could pose risks to the public finances, according to the Medium Term Budget Policy Statement (MTBPS), released by the National Treasury today.

In particular, government is closely monitoring South African Airways (SAA), the South African Post Office (SAPO), SANRAL and Eskom, “with the aim of stabilising these entities and mitigating any risks that may materialise.”

Key actions that have been taken include the following:

  • In September 2016, a new, full-strength board was appointed at SAA. The Board has been tasked with returning the airline to financial sustainability, and is required to fill vacant executive management positions.
  • With a new board and chief executive, SAPO has raised funding to repay creditors and launch its turnaround strategy, which includes an agreement with labour to reduce the likelihood of strikes.
  • The new tolling dispensation has been implemented at SANRAL and legal action is being taken against users with overdue accounts. The agency’s e-toll collections and auctions are closely monitored against projections.
  • The recapitalisation of Eskom in 2015/16 has significantly improved its liquidity and profitability.

According to the MTBPS, in addition to stabilisation measures, progress is being made on several reforms.

“Government is taking steps to rationalise several housing development finance institutions, as well as entities in the telecommunications sector. Advisors will be appointed to provide technical assistance as government considers the possible realignment of its airline shareholdings. The inter-ministerial committee responsible for overseeing the implementation of the reforms has approved the principles that will guide collaboration between state-owned companies and the private sector to accelerate the delivery of new infrastructure projects.”

Following its July 2016 lekgotla, Cabinet announced the decision to establish a Presidential State-Owned Companies Coordinating Council. The council will play a monitoring and coordinating role. The statutory

responsibilities of company boards and executive authorities as set out in the Companies Act (2008) and Public Finance Management Act (1999) remain unchanged.

According to the MTBPS, over the medium term, any requests for fiscal support will be informed by

the principles set out in the 2015 Budget Review:

  • Intervention to support state-owned companies must be consistent with sustainable public finances.
  • Capitalisation cannot have an impact on the budget deficit.
  • Entities receiving support are required to demonstrate sound business plans, improve governance and address operational efficiencies.



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