Budget 2017
STATE-OWNED ENTERPRISES: Free-spending SOEs gobble up government funds
SOEs’ R1.2trillion asset base can be used to improve the economy’s productive capacity, but they have to address their operational management and governance problems
National treasury has increased government guarantees to state-owned enterprises (SOEs) to R477.7bn in the current financial year, up from R469.9bn a year earlier. The amount is equivalent to a quarter of government’s total national debt, allowing companies such as Eskom, the SA National Roads Agency and SA Airways (SAA) to access cheaper funding to continue their operations. These companies have borrowed R308bn against this guarantee so far, treasury says in the Budget Review. "A government guarantee is a commitment to take responsibility for a loan in the event of default; it enables the beneficiary to access funding that would otherwise be unavailable, or to borrow at rates that reflect lower-risk premiums," it says. These guarantees, however, pose the biggest risk to the fiscus and serve to increase the risk premium on the nation’s debt, and government seeks therefore to maintain "these liabilities within prudent levels". Treasury aims to use the combined R1.2trillion asset base...
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