No more bailouts to loss-making SOEs, govt vows

Kgathatso Tlhakudi
Kgathatso Tlhakudi. Image credit: Facebook/Department of Public Enterprises

South Africa’s loss-making state-owned enterprises will no longer receive bailouts from the government, according to Department of Public Enterprises Director-General Dr Kgathatso Tlhakudi.

Speaking during a briefing to Parliament’s portfolio committee on public enterprises on Tuesday (7 September), Tlhakudi said government funding to SOEs will be primarily for expansions and will come with strict conditions.

No more funding for ‘operational shortfalls’

“What has been communicated very strongly throughout government is that the era of funding operational shortfalls are gone. Bailouts, financial contributions to SOEs or recapitalisation will be given when an entity is restructuring itself so that it is sustainable under its own steam going forward,” he explained.

“Where there are opportunities to grow the business, where they will be positive cashflows in line with best practice, [then] funding will be provided under those conditions.

“But funding of bailouts as we know them, where businesses continue to declare losses and must be propped up to continue operating – that will no longer be acceptable. It’s the right way to go because as we know there are many other demands put on our fiscus.”

The government has faced criticism over its frequent SOE bailouts. According to a parliamentary reply by former Finance Minister Tito Mboweni last year, the government spent R187.4 billion bailing out SOEs over the past 20 years.

He further said this funding excludes indemnities, guarantees and other contingent support, which may sometimes fall in the category of government bailouts.

Restructuring

Eskom, South African Airways (SAA) and SA Broadcasting Corporation (SABC) are some of the SOEs that have received massive bailouts in recent years.

SABC has had to implement a turnaround plan that controversially involved retrenchments, while SAA has emerged from business rescue and is in the process of being privatised.

Regarding restructuring of SAA’s subsidiaries Mango Airlines, SAA Technical and Air Chefs, Tlhakudi explained, “We had made a commitment to ensure that the subsidiaries are restructured.

“It took longer than planned because you need to have funding available if you are going to restructure. The R2.7 billion only became available this year in the budget. We are in the process now of restructuring these entities.

“Mango is being restructured now through business rescue. SAA Technical and Air Chefs, there are discussions that are ongoing with the [labour] unions there to ensure that we have an orderly restructuring of those entities because we believe there are adequate resources to ensure that we do not have to [restructure] without having to go into business rescue or liquidation.”

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