Finance Minister Enoch Godongwana. (Dwayne Senior/Bloomberg via Getty Images)
Newly-minted finance minister Enoch Godongwana stood firm on bailouts for ailing state-owned enterprises (SOEs) in his medium-term budget policy statement (MTBPS) on Thursday, saying power utility Eskom must manage its own debt woes and those that could not survive should be allowed to fail.
He rushed to point out that for now, at least until the utility had been replaced with something ensuring sustainable power supply, it was not among those considered expendable, nor was road, rail and ports group Transnet.
“We must be prepared to consolidate some of our state-owned entities and let go of those that are no longer considered strategically relevant,” Godongwana said.
The MTBPS included no further funding for Eskom or any other parastatal, except for taking R2.923-billion from the national revenue fund to cover arms group Denel, one of the parastatals devastated by state capture, after it defaulted on debt repayments.
While treasury officials explained the special transfer at a media briefing prior to the tabling of the MTBPS, Godongwana interrupted to stress: “They defaulted, essentially they defaulted.”
The treasury predictably flagged Eskom as the biggest local risk to South Africa’s fragile, but faster than expected, economic recovery following the biggest contraction in a century last year, triggered by the Covid-19 pandemic.
“There is profound uncertainty about the durability of the economic recovery, mainly due to the renewed volatility in global conditions and the risk of renewed Eskom power cuts,” the MTBPS document cautioned at the outset.
On Wednesday, Eskom’s external auditors told parliament’s watchdog standing committee on public accounts the company’s books were in such disarray that it was hard to see how it would cope with maturing debt of more than R150-billion over the next few years.
But Godongwana indicated on Thursday that for now there were no plans for his department to dig deeper still than the R230-billion bailout over 10 years it has granted Eskom to help service its debt, of which R132-billion has been paid over so far by treasury in annual tranches.
The minister noted that in total the government has given state-owned companies R290-billion in bailouts since 2013. He said his policy on parastatals was per force one of discipline, and he doubted there would be any change when he tabled his first full budget in February 2022.
“As far as SOEs are concerned, I think what I want to do is practice tough love.”
It was simply not possible that those mismanaging them, ran to the government for help and faced no consequences for their actions, the minister added.
“It does not work that way.”
Godongwana hinted he would also adopt a tough stance on containing the public sector wage bill, saying talks with trade unions would be held fairly soon and hence he could not elaborate now.
“I don’t want to be accused by the unions of negotiating through the media.”