South African state-owned entities Eskom, Sapo, and Transnet have faced significant financial challenges over the past three years, with Eskom reporting a staggering R54.6 billion in losses. Efforts are underway to improve their financial situation, including a R254-billion debt relief plan for Eskom and restructuring plans for Sapo and Transnet.
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State-owned entities Eskom, the South African Post Office (Sapo), and Transnet’s financials have been dismal for the past three years, with two of the three posting a loss in 2020/21, 2021/2022, 2022/23.
While efforts are being made to rectify the situation at these companies through turnaround and business rescue plans, all three posted significant losses in 2022/23.
Over the past three years, Eskom has reported losses totalling R54.6 billion, with its most significant coming in the 2022/23 financial year.
The state-owned power utility reported a R18.9 billion loss for the 12 months between 1 April 2020 and 31 March 2021.
Things improved slightly the following year, dropping its net loss to R12.3 billion in 2021/22.
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However, its losses skyrocketed between 1 April 2022 and 31 March 2023, almost doubling the net loss reported the year prior.
Eskom reported a loss of R23.4 billion for the 2022/23 financial year.
“[We had a] net loss after tax being increased almost two-fold … despite a 9.61% increase in tariffs,” said Calib Cassim, acting CEO at Eskom at the time.
Martin Buys, acting chief financial officer at the time of the report, said factors like generation supply constraints and delays in commissioning new independent power producer capacity had the most significant impact on its financial performance.
Transnet has see-sawed between substantial losses and profits over the past three years.
Its most significant loss in the past three years was R8.7 billion in the 2020/21 financial year.
Its finances saw a major swing in the year that followed, with the state-owned port and rail company reporting a R5 billion profit for the 12 months ending 31 March 2022.
However, things swung again the following year, with Transnet reporting a loss of R5.7 billion due to its ports not functioning properly.
Despite the loss, the company’s executives took home a combined R87 million during the financial year.
The Post Office has been struggling for several years. However, it has shown some improvement since 2o19.
Sapo reduced its losses during the 2020/21 financial year, from R5.3 billion in 2019/20 to R2.4 billion.
It reported another slight improvement for the 12 months ended 31 March 2022, when it reported a loss of R2.2 billion.
However, it failed to improve its finances further in 2022/23, with its net loss remaining the same as reported for the 2021/22 financial year.
The chart below tracks Eskom, Transnet, and Sapo’s reported profits and losses from the 2021 to 2023.
Roads to recovery
With help from the South African government (i.e. South African taxpayers), these state-owned enterprises are actively trying to improve their financial situation.
Over the years, Eskom accumulated a large amount of debt building new power stations, amongst other things, to improve its ability to generate electricity.
This, combined with corruption and wasteful spending at the power utility, took a significant toll on its financial situation.
To this end, finance minister Enoch Godongwana, during his 2023 Budget Speech, announced a R254-billion debt relief arrangement for the embattled power utility.
“We are proposing a total debt-relief arrangement for Eskom of R254 billion,” Godongwana said.
“This consists of two components. One is R184 billion. This represents Eskom’s full debt settlement requirement in three tranches over the medium term.”
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“Second is a direct takeover of up to R70 billion of Eskom’s loan portfolio in 2025/26,” he added.
While the bailout will go a long way to reducing Eskom’s debt, it won’t cover all of it, and the arrangement is subject to strict conditions.
In November 2023, the finance minister revealed that the debt relief was no longer interest-free.
In October 2023, Transnet’s board of directors announced that it had completed developing its turnaround plan for the business.
“The turnaround plan is predicated on several detailed goals to reform and strengthen the operational state of the freight rail division in particular, and with priorities of key elements, specifically the rail corridors that service key sectors of the economy,” the board said.
Key aspects of the turnaround plan include:
- Balancing financial stability and operational performance;
- Improving the use and care of operational assets and infrastructure;
- Improving employee engagement and the visibility of management of operations;
- Developing a deeper accountability framework; and,
- Cost-reducing measures to improve cash flow.
Sapo was declared officially insolvent by joint Business Rescue Practitioners Anoosh Rooplal and Juanito Damons in July 2023.
“The Sapo asset base is dwarfed by its total liabilities of approximately R12.5 billion as of 31 July 2023,” they said.
The pair developed a business rescue plan that received approval from Sapo’s directors in December 2023.
The plan is to restructure the Post Office to ensure it can provide its mandated services to South African residents.
“The Post Office fulfils an important social mandate intended to provide key basic communications services to all households, including the rural areas, where access to Wi-Fi, smartphones and printers are not a given,” said Rooplal.
“A restructured Post Office can do this affordably and conveniently, given certain regulatory pricing and geographic reach of the branch network.”
This includes cutting thousands of jobs during the plan’s first phase, to reduce Sapo’s headcount to around 5,000 employees.
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This article was first published by MyBroadband and is republished with permission
