South African taxpayers will be forced to foot the bill for the country’s ailing state-owned enterprises (SOEs) in the future as these organisations face severe financial difficulty and will need government assistance sooner or later.
This is feedback from one of South Africa’s largest asset managers, Stanlib, which manages the country’s largest bond fund and over R600 billion in assets.
In a note to clients, Stanlib said it is encouraging that the National Treasury did not propose additional allocations to SOEs in the Medium-Term Budget Policy Statement (MTBPS).
This shows that the Treasury is taking a hardline approach towards SOEs, pressuring them to restructure and implement reforms before any funds are allocated.
However, most of South Africa’s SOEs are “in serious financial difficulty and will need government assistance sooner or later”, Stanlib said.
“By not making provisions for SOEs now, the Minister is simply delaying the inevitable and pushing the problem down the road.”
Transnet is the most concerning for Stanlib, as the utility has already requested additional funds from the government as part of its turnaround plan.
Transnet has identified areas requiring immediate state support in a turnaround plan being submitted to the government.
Transnet told Bloomberg that its board would discuss the plan with the Public Enterprises Ministry and Finance Ministry.
The utility submitted a plan last month to the Presidency setting out ways to reverse the country’s logistics crisis, which included an ‘Eskom-esque’ partial debt transfer to help ease the burden of its estimated R130 billion debt.
Transnet said a healthier balance sheet is required to finance its rail infrastructure maintenance.
In the MTBPS, Godongwana did not grant any additional allocations to Transnet, nor did he address the company’s turnaround plan.
Stanlib’s concerns echo those of renowned economist Dawie Roodt, who said the impression from the Minister that there will not be further bailouts for failing SOEs is “just not true”.
“We have heard the same story many times before. There will be further bailouts. Transnet will get a bailout. Eskom will get more money,” he said.
He said there will be conditions associated with the bailouts. However, they will get money from the state whether they achieve all the objectives or not.
“If you don’t support Transnet and Eskom, the economy will collapse. You have to support them financially, whether they comply with the conditions or not,” he said.
He added that South African Airways, the South African Post Office, and other failing SOEs will get more money. “It does not matter whether they comply with the conditions,” he said.