R200 billion up for grabs for South Africa’s SOEs

The government has approved over R660 billion in guarantees for South Africa’s state-owned enterprises (SOEs), with R450 billion already accounted for, leaving roughly R200 billion available.

This poses a notable fiscal risk to the government’s finances, as these SOEs are not self-sufficient and rely on state funding to meet their obligations.

Efficient Group chief economist Dawie Roodt recently outlined this threat in a presentation following the tabling of South Africa’s 2026 Budget.

Roodt explained that the government approves a specific amount in guarantees for SOEs every year. 

This is essentially the amount of debt the government is willing to use to financially support SOEs should they default on their debt or fail to honour their contracts.

In the 2026 Budget, the total government guarantee amount is expected to increase from R513.1 billion as at 31 March 2025 to R661 billion as at 31 March 2026.

At the same time, the exposure amount, i.e. the amount that has already been “used” by SOEs, is projected to rise by R10.3 billion to R453.6 billion.

Roodt explained that, in essence, this means SOEs “can go ahead and borrow another R200 billion with the existing guarantees”. 

“We have to remove this. We can’t keep on guaranteeing the debt of these state-owned enterprises,” he said. 

“These state-owned enterprises used to be able to stand on their own financial feet, but because of the mismanagement and the incompetence and the corruption at these institutions, they have been destroyed financially and operationally, and we need to force them to become financially sustainable again.”

The National Treasury has also acknowledged the fiscal risk these guarantees pose in its full 2026 Budget Review.

“Large state-owned companies continue to pose a fiscal risk, with significant contingent liabilities in the form of sovereign guarantees and lingering requests for financial support from government,” the Treasury said.

Concerningly, it explained that, even despite recent operational improvements at some SOEs, “state-owned companies continue to be reliant on government guarantees and support”.

The image below, courtesy of the Efficient Group, shows the government’s approved guarantees and exposure to SOEs.

The two biggest offenders

Only two SOEs – Eskom and Transnet – account for over 90% of the government’s total guarantee exposure. Eskom constitutes 73.6% of total guarantee exposure, and Transnet 17.3%.

Both SOEs have experienced severe financial and operational challenges over the past decade and are currently implementing turnaround measures to improve their standings.

Eskom and Transnet have made significant improvements in their operations, with reforms still ongoing.

These operational improvements have also translated into financial gains, with Eskom posting its first profit in eight years and Transnet significantly reducing its losses in the 2025 financial year.

However, it should be noted that many of these improvements relied on substantial government funding.

Eskom was awarded a massive R254 billion debt relief package in 2022, and Transnet has also received billions in government bailouts.

Positively, the volume of the government’s exposure to Eskom has declined over the past year as the utility’s debt-relief arrangement has been implemented.

The power utility’s three-year funding support will be completed in March 2026, with only R80 billion still left to disburse.

Bank of America analyst Tatonga Rusike previously explained that Eskom is well-positioned for the end of this support, as it has turned around some of its metrics.

In addition, Rusike said that, despite municipal debt still posing a notable risk, he does not expect any new allocations to Eskom, as the utility is now well positioned to survive without government support.

In contrast, Transnet’s finances remain severely strained, and while government efforts to save the utility are gaining speed, progress is slow.

This presents a notable fiscal risk for the government, as it means Transnet will likely remain dependent on state support in the coming years.

Rating agency S&P Global pointed out this risk in its most recent review of South Africa in November 2025.

“In our view, the cash flow deficit leaves Transnet with limited capacity to service its debt (principal and interest) on a stand-alone basis and materially constrains any deleveraging prospects over the next two years,” the agency said.

“Consequently, we expect the company to remain dependent on government support, primarily through guarantees, to address its refinancing requirements.”

Transnet was a major contributor to the R10.3 billion rise in government exposure for 2026/27, with additional guarantees of R145.8 billion issued to the logistics utility in 2025/26.

“Given the weight of Eskom and Transnet in the guarantee portfolio, their guarantees remain a significant fiscal risk,” the National Treasury said in its 2026 Budget Review.

The table below from the 2026 Budget Review shows the government’s guarantee exposure to different SOEs between 2023/24 and 2025/26.