STATE-OWNED ENTERPRISES
A case of mixing up the profit motive
Under the combined leadership of Pravin Gordhan, Nhlanhla Nene and Malusi Gigaba, the Treasury has consistently rewarded SAA for losing money
For decades, SA’s wealth has been poured into state-owned enterprises (SOEs), which have consistently managed to provide negative returns on investment. No matter how many equity injections and loan guarantees are given to Eskom and SAA, they always want more. Eskom’s debt is R376bn and its net finance costs are R10bn. In comparison, SA’s total national net debt is R2.28-trillion and debt-service costs are currently about R163.2bn. Government loan guarantees to Eskom are R350bn and the company has already used about R254bn of those guarantees. Along with a complete inability to build the Medupi and Kusile power stations on schedule and within budget, Eskom has a liquidity crunch and diminishing profits. Marginal declining rates of return on tariff increases are kicking in: as the cost of electricity rises, consumers reduce consumption, which decreases Eskom’s sales, meaning tariffs need to rise even more. That is a swirling vortex of despair. The "minister of fashion", Malusi Gigaba...
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