/ 24 February 2012

More tough love for parastatals

The days of the state forking out billions of rands to parastatals are over. The government has reined in public enterprise expenditure from R3.3-billion in 2008 to R353-million in 2011, and its tough stance on bailouts for the parastatals seems to be working.

With parastatals playing a central role in the rolling out of R3.2-trillion for infrastructure, they are being expected to fund their own balance sheets. Eskom, for example, has to oversee the building of the R121-billion Kusile power station and the R99-billion Medupi power station, and Transnet has to do the same for the R10-billion Moloto rail link, the R18-billion manganese rail and terminal project, and the R37-billion coal line between Mpumalanga and Richards Bay.

“Public entities such as Eskom and Transnet [must] finance their investments from internally generated surpluses and borrowing from the capital market,” said Finance Minister Pravin Gordhan in his budget speech. “This means that they have to generate sufficient revenue from tariffs and charges to repay debt over time, and cover operating and maintenance costs.”

Arms company Denel and state diamond mining company Alexkor once again required bailouts. The government handed out R700-million for the recapitalisation of Denel Aerostructures and Alexkor received R350-million to settle outstanding obligations arising from the Alexkor/Richtersveld community settlement.

Denel received R258-million in 2008, R192-million in 2009, R181-million in 2010 and R116-million in 2011. Alexkor received R130-million in 2008, R129-million in 2009 and R131-million in 2010.

The pebble bed modular reactor, SAA, Transnet and SAA Express all received bailouts between 2008 and 2011, but none of them will be getting any recapitalisation in 2012.

Last week SAA asked for between R4-billion and R6-billion for recapitalisation, but the government has ignored the request. The message is clear: stand on your own two feet.

The Estimates of National Expenditure document lays out the state’s view: “State-owned enterprises need to change their investment planning framework from one that is based on what their balance sheet can afford to one that is based on ascertaining what investments are required to unlock growth.”