Nhlanhla Nene: Picture: REUTERS/JOSHUA ROBERTS
Nhlanhla Nene: Picture: REUTERS/JOSHUA ROBERTS

A joint team of banking and government officials has been established to look into the immediate funding needs of the state-owned enterprises (SOEs) that are facing difficulty in meeting their obligations to pay staff and suppliers.

A joint team will also look at new funding options of state-owned companies for the future, as well as their medium-to long-term structural issues.

The initiatives come out of a meeting between Public Enterprises Minister Pravin Gordhan, Finance Minister Nhlanhla Nene and CEOs of banks and asset managers in which the government appealed to the financial sector to assist SOEs in difficulty.

Cas Coovadia, the MD of the Banking Association SA, released a statement in which he said the leadership of banks and asset managers had acknowledged the strategic importance of state-owned enterprises and recognised that they could not be allowed to fail.

Damaging Effect

"State-owned enterprises — like Eskom and Transnet — provide essential services that are necessary for the day-to-day functioning of the economy," the statement read.

"If any of them defaults on its debt or goes into bankruptcy, the impact on the economy, businesses and government finances will be damaging…. As responsible corporate citizens, banks will do what they can to avert this," it said.

The teams would look at both immediate liquidity issues and long-term funding arrangements, which would include looking at restructuring, Coovadia said in an interview on Monday.

"As part of this process we are embarking on, the first thing is to recognise that some state-owned companies have liquidity problems now that need to be addressed irrespective of whether they are structured correctly [for the market]. They need to be stabilised now.

"But we are also saying we cannot talk about the short term without looking at the medium term, and that is where the restructuring comes in," he said.

The statement underlines that lending will be done "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."

It was agreed that the government would have to continue "to underwrite the funding of state-owned companies…. This is essential to assure banks, their customers and their shareholders that state enterprises will be able to meet their future obligations," said the statement.

Coovadia said there were ideas and views within the financial sector on how the government could guarantee debt of state-owned companies. "We believe we have ideas that we will put on the table, that will institute some sort of discipline, from the point of view of the lender, in this debate," he said.

The government will also be consulting with other stakeholders in the debate.