Do not expect word on state’s funding plans for SOEs before end-October
Finance minister Nhlanhla Nene says the state-owned company sector represents a major risk to the fiscal framework, and reforms are required
Details of government support for state-owned enterprises (SOEs) will only be forthcoming in the medium-term budget policy statement to be tabled in parliament on October 24 but the aim is to keep such support deficit neutral, finance minister Nhlanhla Nene said on Monday.
A number of loss-making SOEs such as SAA, SA Express and Denel are in dire need of an injection of funds and have appealed for government assistance. SAA has indicated that it needs R21.7bn over the next three years to turn the company around and make it profitable.
SA Express says it needs R1.74bn, while the figure for Denel, which has experienced serious liquidity challenges, is about R3bn.
The distressed state of SOEs has been flagged by credit ratings agencies as one of the risks to the fiscus that could hamper an improvement in SA’s sovereign rating.
Public enterprises minister Pravin Gordhan has taken steps to bolster governance and management at SOEs by appointing new boards of directors as well as new executives, but this has not been sufficient to dig them out of their financial woes.
Nene insisted in a reply to a parliamentary question by COPE leader Mosiuoa Lekota that the government had adopted the principle that as far as possible any financial support to SOEs should be done in a deficit-neutral manner.
“This can be done through … the sale of non-core assets, [the] re-prioritisation of spending, or other revenue measures. Nevertheless, as noted in the 2018 budget review, the … [SOEs] sector represents a major risk to the fiscal framework and reforms are required to put these companies on a more sustainable footing,” said Nene.
He said part of the reform process would involve the “costing of developmental mandates to provide government with a better understanding of the level of support required for non-commercial activities”.
“Another part will require understanding how to bolster their commercial activities, through … efficiency improvements and private sector participation. The budget process is currently under way,” the minister added.
Any decisions on financial support to SOEs would be considered as part of this broader process and would be published in the 2018 medium-term budget policy statement.
In reply to another parliamentary question by EFF MP Godrich Gardee, Nene said total expenditure on cleaning by national and provincial governments as well as state-owned entities (excluding SOEs) in 2017-2018 was R1.6bn. Gardening cost R423.3m and private security services R7.65bn.