The Banking Association of South Africa (BASA) has said its members are willing to help out stressed state-owned enterprises (SOEs) such as Eskom and Transnet with “expertise and resources” following a meeting with ministers.
In a statement on Monday afternoon, BASA’s managing director Cas Coovadia said the banking body, the Association for Savings and Investment South Africa and the South African Savings Institute met with Public Enterprises Minister Pravin Gordhan and Finance Minister Nhlanhla Nene last week.
“The meeting was briefed on the substantial progress government has made in strengthening governance and management at SOEs,” said Coovadia.
“The ministers, however, pointed out that some of the companies are experiencing severe financial and operational difficulties and need assistance from business and other stakeholders.
“Banks and asset management companies indicated that they are willing to work with government and make use of their expertise and resources to help resolve the difficulties being experienced by SOEs.”
A spokesperson for national treasury said on Monday it would not be putting out a statement regarding such a meeting.
Coovadia said that if cash-strapped SOEs like Eskom and Transnet were to default on their debt — or go into bankruptcy — the impact on the country’s economy, businesses and government finances would be damaging.
“The sustainability of SOEs is critical to the financial services industry, because of the exposure banks and asset managers have to these enterprises.”
State power utility Eskom is in a precarious financial position and during recent negotiations initially asked its employees to accept a wage freeze to help its finances recover. Unions rejected the offer and threatened to strike.
According to Eskom, acts of sabotage and intimidation led to load shedding, although unions have denied being involved. Wage talks have since resumed and are set to continue on Wednesday.
How will they help?
Coovadia said that, as responsible corporate citizens, banks will do what they can to make sure that SOEs remain sustainable.
He did not specify how banks and financial institutions would or could help out, beyond providing “expertise and resources”.
The goal, however, was to help stabilise SOEs.
“In assisting government to stabilise SOEs, banks will need to remain within the prudential requirements intended to safeguard depositors’ money and shareholder capital invested in their businesses. All parties at the meeting agreed that the stability of the country’s financial system cannot be put at risk,” he said.
“Government agreed to consider options to underwrite the funding of SOEs and work with financial institutions to ensure their long-term sustainability. This is essential to assure banks, their customers and their shareholders that state enterprises will be able to meet their future obligations.” — Fin24