Cash-strapped utilities that were hoping for financial respite from the budget were left disappointed as finance minister Malusi Gigaba chose not to make any new allocations to shore up their leaking balance sheets.

Instead of the carrot that state-owned enterprises (SOEs) were hoping for, the minister spoke of the stick. He said government would prioritise strengthening corporate governance and the management teams of SOEs to eliminate rampant corruption. Nonetheless, the R466bn in government guarantees, given to the entities as collateral for their debts, will stay in place. The last of the guarantees — R350bn extended to cover Eskom’s debt — will expire in March 2023.

First in the whipping line would be the board and management of arms manufacturer Denel, Gigaba said.

Denel’s new board will be announced soon, as will a new set of directors for SA Express (SAX) — the regional airline operator that is set to soon be merged with its larger but equally cash-strapped cousin, SA Airways (SAA).

Both Denel and SAX have been operating only thanks to the loan guarantees they have from government. Neither has been able to fund its operations independently.

In December, Denel was forced to turn to national treasury for a further R580m loan guarantee to pay the salaries of its approximately 2,000 employees. This was in addition to a R1.9bn increase in a debt guarantee that government had extended to Denel earlier, hiking its total exposure to R2.4bn.

"We will follow the same path of fixing management and governance teams as government has done at Eskom," said Gigaba.

Eskom has been perhaps the worst and most visible of the bumbling SOEs. To strengthen its governance, six new directors were appointed to the board in January, including Telkom chairman Jabu Mabuza. The power utility also replaced Sean Maritz, who had been acting CEO for three months, with the highly rated Phakamani Hadebe.

Eskom’s new board was also mandated to cull all senior managers and executives who had been accused of corruption from its top ranks immediately. Since then, seven executives have either resigned or been fired, including former chief financial officer Anoj Singh and head of generation Matshela Koko.

It was a commendable step to improve governance, but Eskom didn’t have a choice. Eskom’s major lenders said that for them to keep their credit lines open, the utility had to remove all those accused of the corruption that has crippled the utility and driven it to the brink of defaulting on its bonds. The electricity producer still has R540bn in outstanding debt.

Quite when the new boards at the other companies will be appointed is anyone’s guess. On this point, Gigaba said: "The time frame of board appointments for the other companies will be announced as soon as the president firmly takes charge of the presidential infrastructure commission."

But again, it’s not like there’s a choice. Gigaba said that "lenders have been saying they cannot lend to the companies before corruption is dealt with and those accused [have been] removed".

This has already happened at SAA, which last year recruited former Vodacom Group executive Vuyani Jarana as CEO. Jarana’s appointment put a stop to the revolving door of the executive suite at Airways Park, the carrier’s head office. Political and board interference under the leadership of Dudu Myeni, the former chair and a friend of Jacob Zuma, resulted in SAA going through no fewer than six CEOs in six years.

Myeni was last year replaced by corporate veteran Johannes B Magwaza, who was appointed to the board together with Martin Kingston, the CEO of investment bank Rothschild’s SA unit.

Though SAA’s survival remains precarious, Gigaba said the airline would receive only the R3bn government had already promised it, together with the R5.5bn that had been transferred to settle the debt liabilities in 2017. That R3bn would be paid to SAA next year, he said.

Of course, this is in addition to the R19.1bn debt guarantee government has extended to SAA. Government has also maintained its R39bn debt guarantee to the SA National Roads Agency (Sanral), whose finances have been weakened by the revolt against e-tolls. Sanral is, however, in the early stages of modernising the road infrastructure, particularly in the Eastern Cape, where it will build a new highway at a cost of about R8bn.

But it does seem as if these state-owned companies are cutting back.

In all, these entities will borrow about R368bn from the capital markets over the three-year medium-term budgeting time frame, compared with R433bn over the previous medium-term expenditure period.

Railway and logistics operator Transnet has said it would scale back its capital investment plans because demand had been weaker than expected. This will allow the transport utility to pay down its debt over the next five years.

There is a downside to this, however. Curtailing building railway infrastructure may have negative consequences when economic growth picks up. But that is still some way away.