South Africa’s government blew R331 billion on SOE bailouts

The South African government has spent R331 billion on bailouts for state-owned enterprises since 2013/2014, of which Eskom accounted for 55%.

This data was revealed in a presentation to the Standing Committee on Public Accounts on state-owned company (SOC) bailouts and government guarantees.

The 2012 Presidential Review Commission (PRC) on SOCs highlighted several challenges facing these entities, including:

• Multiple and conflicting objectives
• Inadequate financing policies and frameworks
• A lack of adequate oversight and accountability
• Severe weaknesses in board composition and functioning
• A lack of transparency and accountability

Over the last decade, there has been a significant decline in the performance of major SOCs.

Operational costs have increased, net profits have fallen, and debt levels have become increasingly unsustainable.

Customers have also complained about the increasingly poor levels of service delivery, which is particularly prevalent with companies like Eskom and the South African Post Office (SAPO).

Compensation costs have far outpaced the growth of these businesses and have become a key factor in declining net profits or losses.

The multiple bailouts for Eskom, South African Airways, the SABC, the SAPO, and others have become a fiscal burden.

The high debt levels have increased fiscal risk to unacceptable levels and have crowded out important social and other expenditures.

R331 billion in government bailouts

The presentation revealed that the government had spent R331 billion in bailouts of Eskom, SAA, Sanral, Sasria, the Land Bank, the SAPo, and Denel.

These bailouts, called recapitalisations, were granted to implement turnaround plans, repay debt and government guarantees, improve liquidity, and for capital expenditure.

The bailouts increased from R2.9 billion in 2014 to R65 billion in 2023, illustrating the deteriorating state of these organisations.

Despite large bailouts, state-owned enterprises like Eskom, the SAPO, and Denel are now in a much worse state than ten years ago.

The table below shows state-owned company bailouts over the last decade.