Carol Paton Writer at Large
SOE funding: Telkom technicians replacing cables in Johannesburg. Treasury director-general Dondo Mogajane said on Wednesday that the disposal of Telkom "is not off the table". Picture: SUNDAY TIMES
SOE funding: Telkom technicians replacing cables in Johannesburg. Treasury director-general Dondo Mogajane said on Wednesday that the disposal of Telkom "is not off the table". Picture: SUNDAY TIMES

The business model of several state-owned enterprises (SOEs) must be revisited and their capital structure overhauled if they are to survive in the future, Finance Minister Malusi Gigaba said on Wednesday.

The overhaul could include an equity injection from the government, the disposal of equity stakes to the private sector or the introduction of strategic equity partners. The new approach would be undertaken in line with a policy framework on SOEs that is under development by the Cabinet.

Gigaba said the "government recognises that the business models of some state-owned companies are unsustainable and their capital structures too reliant on debt. To confront these issues we will assist them to develop and implement robust turnaround plans."

His comments echo those of President Cyril Ramaphosa in his state of the nation address that "state-owned companies can no longer borrow their way out of their financial difficulties" and affirm a bold new approach to private participation in the public sector.

Some companies require both restructuring and equity investment, he said.

Finance Minister Malusi Gigaba delivered his annual budget speech in Parliament on February 21 2018. Here are the highlights. Subscribe to TimesLIVE here: https://www.youtube.com/user/TimesLive

However, he confirmed in a briefing on Wednesday morning that financial support would be done in a "deficit-neutral way", which would not affect the borrowing requirements of the state. "So, we are looking at the sale of state assets," he said.

The Budget Review refers to the identification of state property to the value of about R40bn for disposal. The Treasury has previously considered selling its 39% stake in Telkom, valued at about R13bn, to raise funds for SOEs. While the government had been poised to go ahead with the Telkom deal last October, the Treasury said the leak of a Cabinet memo shortly before had scuppered the deal because of the dampening effect on the share price.

The Telkom disposal "is not off the table", Treasury director-general Dondo Mogajane said at Wednesday’s briefing.

Governance was being cleaned up, beginning with South African Airways and Eskom and with the Denel board next on the chopping block, said Gigaba.

patonc@businesslive.co.za