SOEs rack up R700bn debt in last financial year – Gigaba on ‘warpath’

CAPE TOWN — If you’re wondering why Moody’s finger is hovering over the ‘eject’ button as our economy lines up for a crash landing, consider this humble fact: Our State-guaranteed and owned enterprises incurred R700bn in debt over the last financial year. There are those who thought Zuptoid remorse was possible when Eskom CEO Brian Molefe shed tears at a press conference as his far-fetched lies invented to distance himself from the Gupta brothers were exposed. We’d not seen that behaviour from his counterparts when their shady deals were exposed, so we cut him some slack. Now he’s suing Eskom for unfair dismissal after resigning in the ‘interests of good governance’ (and then accepting reinstatement when his R30m package for 22 months work was rescinded). Would that more of his ilk now have a farewell cry – it’s good for the soul. Certainly, the soul of the nation. New Finance Minister Malusi Gigaba, who revealed this astonishing debt, is cracking the whip at the impunity with which his SOE CEOs operate. If he did anything else, our fiscal risk would soar even faster, giving wings to more capital flight and setting us back decades. Neither time nor SOE’s chiefs are our friends. – Chris Bateman

By Liesl Peyper, Fin24

Cape Town – Nine of South Africa’s state-owned entities racked up debt of close to R700bn in the 2015-’16 financial year on which they had to pay R51bn worth of interest.

This was according to a written response from Finance Minister Malusi Gigaba following a parliamentary question posed by the Democratic Alliance’s (DA) Archibold Figlan.

In his response, Gigaba made a distinction between state-owned entities that borrow for capital expenditure, namely the Airports Company of SA (Acsa), SAA, Sanral, The Trans-Caledon Tunnel Authority (TCTA) and Transnet. The debt these six entities incurred amounted to R557.1bn with an interest rate of R43.9bn for the 2015/16 financial year.

Malusi Gigaba, South Africa’s finance minister, prepares to speak during a news conference in Pretoria, South Africa, on Saturday, April 1, 2017.

This excludes the over R200bn guarantee that government has provided to Eskom.

The other three state-owned entities, Gigaba said, are development finance institutions – the Land Bank, Development Bank of SA and the Industrial Development Corporation (IDC). Their debt for the 2015/16 financial year amounted to R112.8bn on which R7.1bn of interest was paid.

Gigaba in his reply did not mention the guarantee that was provided to Eskom to build the Medupi and Kusile power plants. Of the R350bn guaranteed, R210bn had been drawn down so far.

State-owned entities contribution to South Africa’s debt to GDP has been cause for concern among economists who have warned that it is not sustainable. It is also worrying to ratings agencies which have said on a number of occasions that state-owned entities are too dependent on government for funding.

Gigaba recently told journalists at a media briefing that ratings agencies are especially concerned about the fiscal risk these entities pose to government’s ability to toe the fiscal line.

He was critical of the well-paid executives at state-owned entities who do not manage and govern properly and called on them to exercise the same fiscal prudence that the rest of government is doing.

“People who occupy executive positions at SOEs are highly paid, he added. “We can’t pay (such high) salaries for people who think they can run them (SOEs) down (with) impunity. We need to be punitive to those who do shoddy work.”


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