Deputy Finance Minister Mondli Gungubele says the government has agreed to sell the assets of some state-owned entities (SOEs) and to allow private equity in others to boost falling revenues and service ballooning debt obligations.
But reversing the value-added tax (VAT) hike is out of the question.
Speaking to the Mail & Guardian this week, he also threw his weight behind suggestions that the Public Investment Corporation (PIC) should consider converting its loans in parastatals such as Eskom into equity to improve their balance sheets.
The suggestion was first made by ANC treasurer general Paul Mashatile, who last month revealed the matter had been discussed by the top echelons of the ANC.
“The state is exposed by SOEs by no less than R400-billion. That’s what we owe lenders. Eskom alone is owing more than R300-billion,” said Gungubele.
Gungubele, who is also the PIC chairperson, said that, if any of the state-owned entities were to default, the state would be forced to pay what was owed to lenders. “It means you must have R400-billion to bail [the SOEs] out. It is critical that the PIC has confidence in Eskom as it plays an important role in the country’s economic growth.”
Gungubele said it was critical that the government showed confidence in Eskom and, for example, by turning R100-billion into equity, it would have a significant positive effect on the utility’s balance sheet.
“What has been open now is that decision [to sell the assets] is taken. Even at [the ANC] lekgotla [this week], the president [Cyril Ramaphosa] was very clear that we are open now to private equity partners if it can improve [the financial situation in SOEs],” Gungubele said. It did not make business sense for the government to hang on to some of its loss-making entities.
“I am asking one question: If an asset is a burden to the state, it adds no value. Why do you torture the state with the keeping of that asset because the translation is that the burden of the cost of that asset translates [into] the inability of the state to provide services to the poor.”
Gungubele also expressed concern about the size of the public service salary bill. His main concern was that, of the R3-trillion budget, more than R1-trillion went into consumption and not into development.
“That’s a suicidal budget. As we speak, the fastest-growing share of our expenditure now is the salary bill and the interest to the debt, which is not less than R180-billion.”
He warned that a budget deficit meant the state was essentially spending most of its resources on servicing debt instead of on infrastructure and social upliftment, which was deterring investors.
He said the treasury had no intention of reviewing its decision to increase VAT, despite labour federation Cosatu’s call to do so.
“We are engaging Cosatu and explaining why VAT was the option. There is a series of taxation systems. One of the key things about tax is that it must be administratively efficient. It must not cost you more than what you want. Its burden must be distributed equitably.
“We know the pain but we have engaged Cosatu and we stay open. If there is a better way of quickly raising revenue, we would drop the VAT yesterday.
“At the moment the country must be saved,” he said.