GOVERNMENT GUARANTEES
HILARY JOFFE: Teetering dominoes of SA’s state entities
Ratings agencies have been warning for some time that the biggest risk to the country’s public purse, and to its ratings, are the "contingent liabilities" that result from the guarantees the government has given to state-owned enterprises (SOEs). Equally, Treasury officials have been worried about the risk of contagion if even one of those SOEs defaults on a loan agreement. Those risks have come disturbingly close to materialising in the past couple of weeks. SA has been saved for now, but it may not be again — at least not without serious efforts to sort out the mess at the SOEs. A first sign of trouble came in June when Standard Chartered refused to roll over its R2.3bn loan facility to South African Airways (SAA), forcing the Treasury to pay up to avoid a default that could have resulted in all the other lenders to call in the guarantees to SAA. But the real trouble came when Eskom’s auditors SizweGobodoNtsaluba issued a qualified audit opinion on the power utility’s financial st...
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