National Treasury appeared before the Standing Committee on Public Accounts (SCOPA) to account for the feasibility of the new preconditions for financial bailouts aimed at turning around the financial misfortunes of state-owned enterprises (SOEs). South Africa’s SOEs face mounting challenges with, among other things, liquidity, solvency, weak governance, poor programme execution, capital mismanagement, and a lack of accountability, oversight and financial transparency.
The National Treasury reported that multiple SOE bailouts have created a high fiscal burden, with associated high government debt. This poses an unacceptable fiscal risk that limits state social expenditure. So severe is this situation that SOE bailouts are set to rise from R384.7 billion in March 2021 to R396.1 billion in the current financial year.
The Chairperson of SCOPA, Mr Mkhuleko Hlengwa, commented on the preconditions now preceding the new round of financial bailouts, saying these bailouts are seemingly based on a misalignment of issues of principle. “As a result, we often dispense financial solutions to non-financial problems.”
More alarmingly, Mr Hlengwa said, when new terms and preconditions are put in place a new crisis is engineered. Eskom is a case in point, he pointed out. “We are suddenly faced with an engineered crisis at Eskom that has not only led to rolling black-outs, but that led to the categorisation of Eskom’s inability to generate and supply energy as a national disaster.” One wonders how binding these new preconditions are and the management regime they are they subjected to, he asked.
The same can be said about the South African Broadcasting Corporation, Denel, Post Office South Africa. “You name any SOE, they continue to fail, but we continue to rescue them financially, despite their poor financial management of the bailouts meted to them previously.” This goes to show that money won’t fix some of the structural governance, procurement and financial mismanagement issues faced by the SOEs, the Chairperson said.
Given the history of bailouts, Mr Hlengwa wondered if the new preconditions for financial bailouts for SOEs announced by the Minister of Finance are not a ploy to “legitimise these bailouts”.
He maintained: “The fact that SOEs are mandated to fulfil national strategic objectives does not mean that they have to be funded by taxpayers at all cost, or to use the taxpayer as a default position for their financial mismanagement.”
“These businesses cannot carry on as usual when they fail to generate jobs. They should grow and not be a drain to our economy. SOEs should enable the state to fulfil its socio-economic responsibilities. It can’t be the other way round. We can’t continue to finance, subsidise and bail them out at the expense of their stated national objectives.”
There must come a time when National Treasury should say no to financial bailouts of SOEs and be left to face the consequences that comes with that, he opined. “Your report has made it clear that there is a long road to be traversed to bring stability, let alone growth in this space,” he concluded.
14 March 2023