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Thu May 26 12:46:40 CAT 2016

Parastatals face bullet

Bianca Capazorio | 25 February, 2016 06:14

State-owned entities were no longer "sacrosanct" and untouchable, Finance Minister Pravin Gordhan said during his Budget speech yesterday as he announced that the government was mulling over plans to merge, reconfigure or even close some of the poorly performing ones.

Struggling SA Airways faces the possibility of being told to merge with SA Express, and Gordhan has given the strongest indication yet that the government is considering hooking it up with a private-sector investor.

He said the country had "too many" parastatals and the government was considering merging them with small and medium entities or closing them.

With government guarantees for all parastatals totalling R467-billion - with a negative return on equity - they had become a big drain on the public purse.

Gordhan said he hoped that overtime the word "bailout would be erased from our vocabulary."

Although he did not want to use the word "privatisation" , the minister said during a pre-Budget press conference that the government was considering a "minority equity partnership" for SAA.

Budget GRAPH.jpg

The ailing airline has not yet tabled its 2014-2015 annual report but is expected to report a loss as a result of "high operating costs, increased competition on all routes, asset impairments and higher finance costs".

But Gordhan said one of the first steps to be taken to fix the airline was to appoint a permanent board.

In his speech, he said he and Public Enterprises Minister Lynne Brown had agreed to explore the possibility of merging SAA and SA Express under a strengthened board "with a view to engaging with a potential minority partner, and to create a bigger, more operationally efficient airline".

Last week SA Express told parliament's public enterprises committee that it had managed to turn "a small profit" but conceded that this was not nearly enough to fund a planned fleet renewal programme.

The airline said it had drawn up funding plans to be submitted to the government soon.

Electricity utility Eskom has received R14-billion of the R23-billion government appropriation approved last year.

The Budget review states that the release of an additional R5-billion had been delayed until certain conditions around implementing cost reductions and improving maintenance had been met.

The embattled SA Post Office recorded a net loss of R1.5-billion for the 2014-2015 financial year as a result of declining revenue, loss of key customers caused by strikes and the poor performance of its courier business.

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