South Africa loses billions due to mismanagement and corruption

From bailouts for failing state-owned enterprises (SOEs) to the e-toll debacle, the government has lost billions due to mismanagement and corruption.

In recent years, many of South Africa’s SOEs have experienced a decline in performance. This is characterised by rising operational costs, shrinking profits, and unsustainable debt levels.

Customer dissatisfaction with service delivery has also grown, particularly with companies like Eskom, the South African Post Office (SAPO), and Transnet.

Soaring compensation costs have outpaced revenue growth for these businesses, significantly contributing to their declining profitability. 

The repeated bailouts provided to Eskom, South African Airways, the SABC, SAPO, Transnet, and Denel have heavily burdened the national budget.

Furthermore, the high debt levels of these SOEs heighten the risk of financial instability and limit the government’s ability to fund essential social programs and other critical expenditures.

In addition, many of these SOEs have seen multiple reports of corruption, with Eskom alone reportedly having lost R81 million to fraud and corruption in the 2023 financial year.

In addition to the billions spent on SOE bailouts, the government has also taken on debt from e-tolls, a scheme that has finally been scrapped after over a decade.

The e-toll system was launched in December 2013 to recoup funds used to upgrade the Gauteng Freeway Improvement Project (GFIP).

However, the system faced severe controversy, as many users disliked the additional cost and felt it was unfair. There were also complaints about the tolling process itself.

The issue reached a boiling point in October 2022, when the government announced it would be scrapped due to public pressure and the need to find alternative funding for the GFIP debt. E-toll gantries were finally switched off in April 2024.

Below is an overview of the government’s spending on bailing out SOEs and the billions it will need to cover due to the e-toll fiasco.

SOE bailouts

The DA said in May that the ANC government had spent R283 billion bailing out Eskom, Denel, Transnet, and SAA over the past five years. 

This was revealed in a reply to a DA parliamentary question from Public Enterprises Minister Pravin Gordhan.

Gordhan further said that only SAFCOL declared a R1 million dividend to the government shareholder in those five years. 

“This is a shocking return on investment that exposes how the ANC government’s state-led SOE model has collapsed public finances and exerted a heavy toll on already overburdened taxpayers,” the opposition party said.

“The ANC government, under President Cyril Ramaphosa’s false ‘new dawn’, has not only failed to revive the moribund SOE sector, but it has thrown hundreds of billions of rand into the SOE financial blackhole with no positive return for the South African taxpayers.”

A parliamentary report earlier this year also revealed that the government has allocated R325.3 billion for bailouts of South Africa’s SOEs since 2020.

In February 2024, the National Treasury gave a new report to parliament on the financial situation of the country’s SOEs.

This report showed how much the government has spent on bailing out different SOEs in the country over the past several years – amounting to hundreds of billions of rands.

Financials for the third quarter 3 of Eskom, Transnet, South African Airways (SAA), the South African Post Office, the Land Bank, and Denel were presented to the Standing Committee on Appropriations on 14 February 2024.

These SOE bailouts have cost the country billions, with very little to show, as many of them remain dysfunctional and in severe debt.

E-toll fiasco

The Gauteng provincial government (GPG) and national transport ministry recently celebrated the shutdown of e-tolls, but many questions remain about what will happen to the scheme’s outstanding debt.

Although e-toll charges stopped on 12 April 2024, historical e-toll debt has not been scrapped.

The shutdown of the e-toll system was enabled through a years-long negotiated agreement between the national government, GPG, and the South African National Roads Agency (Sanral).

Sanral previously operated the system and had planned to use it to fund the Gauteng Freeway Improvement Project (GFIP).

As part of that deal, the National Treasury is paying 70% of Sanral’s estimated R43-billion e-toll debt, while the GPG must contribute the remaining 30%.

This amounts to an estimated R30 billion in debt that the National Treasury will take on.

However, Transport Minister Sindisiwe Chikunga has said that e-toll defaulters remain obliged to pay their debts.

“How we will enforce or not enforce is a matter we have not discussed; we will be tending to that as time goes on,” Chikunga said.

Wayne Duvenage of the Organisation Undoing Tax Abuse (Outa) said the government and Sanral wasted R70 billion of taxpayer money on the project.

Duvenage said that adding just 10 cents to every litre of fuel sold in South Africa from 2008 would have seen the entire cost of GFIP paid off by 2018.