BUDGET 2023 | Eskom debt relief plan has overshadowed financial woes of other SOEs

Some have received assistance but many still in dire straits

22 February 2023 - 14:43 By KHULEKANI MAGUBANE
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Transnet will go to the market to raise funds after a $6bn bond sale programme in January. In 2022, it received two allocations of R2.9bn to assist with train maintenance and repairs to damaged rail infrastructure after last year’s flooding.
Transnet will go to the market to raise funds after a $6bn bond sale programme in January. In 2022, it received two allocations of R2.9bn to assist with train maintenance and repairs to damaged rail infrastructure after last year’s flooding. 
Image: File

The huge R245bn debt relief plan that finance minister Enoch Godongwana announced for Eskom makes it easy to forget the financial straits that other state-owned entities (SOEs) find themselves in. 

Godongwana came to the rescue of some SOEs while others were left to approach the markets or make do with in-year allocations to tide them over. 

The finance minister tabled the 2023 Budget Speech at Cape Town City Hall on Wednesday afternoon in a joint sitting of the houses of parliament. The budget comes amid rising debt for the fiscus and ongoing financial woes for the government’s many parastatals, chief being Eskom.

“Debt-service costs are projected to average R366.8bn annually over the medium term, reaching R397.1bn in 2025/26. These are resources that could otherwise be used to address pressing social needs or to invest in our future.  

“There are risks to the fiscal outlook. These include a worsening of the economic outlook, a further weakening of the finances of state-owned companies, and an unaffordable public-service wage agreement,” the minister said. 

The 2023 Budget Review said while total assets of SOEs grew 4.3%, from R1.23-trillion during the 2020/21 financial year to R1.28-trillion during the 2021/22 financial year, rising interest raised their debt to a higher average cost. 

“As a result, total liabilities, which consist mainly of borrowings, increased by 1.4%, from R850.6bn in 2020/21 to R862.8bn in 2021/22. Accordingly, net asset value for major state-owned companies increased by 10.9% to R417.6bn,” the Budget Review said. 

SAA received a further R1bn in the 2022/23 financial year to assist with outstanding obligations to creditors. However, the department of public enterprises estimated in 2021 that SAA would need R3.5bn to cover its receivership liabilities. 

The Post Office will receive R2.4bn in line with the medium-term commitment it received in last year’s budget speech on the condition it implements its turnaround strategy and brings down spending. 

Transnet will go to the market to raise funds after a $6bn (about R109bn) bond sale programme in January. In 2022, it received two allocations of R2.9bn to assist with train maintenance and repairs to damaged rail infrastructure after last year’s flooding. 

The Budget Review said Denel has received R5.8bn since 2019/20. Last year the government allocated it R204.7m to reduce its contingent liabilities and R3.4bn to complete its turnaround plan.  

“Though it has received the first amount of R204.7m, it has not yet met the conditions for the R3.4bn,” the review said. 

The document said R5bn retained in the 2022/23 contingency reserve from the 2022 medium-term budget will be allocated to Land Bank “with conditions attached to its use”. 

The Budget Review said the South African National Roads Agency (Sanral) already received R23.7bn in the 2022/23 financial year as part of a solution to the Gauteng Freeway Improvement Project (GFIP) which was not generating enough toll revenue to cover the debt from construction.  

“The new funding model for this system is the financing arrangements between national government and the Gauteng provincial government. This is not national government’s preferred option, and the policy position is that direct road user charges remain the most efficient, effective and equitable financing mechanism,” it said.  

The Budget Review said the R23.7bn conditional allocation would help Sanral settle maturing debt and debt-related obligations. The document said the Gauteng provincial government would contribute to the costs associated with this infrastructure investment of the GFIP. 

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