Gigaba lashes SOEs, but another SAA soft landing

Half term: Finance minister props up floundering national airline, Post Office to the tune of R8.5bn

26 October 2017 - 06:37 By Bianca Capazorio
Finance Minister Malusi Gigaba during his Medium-term Budget speech in parliament in Cape Town on Wednesday.
Finance Minister Malusi Gigaba during his Medium-term Budget speech in parliament in Cape Town on Wednesday.
Image: Esa Alexander

State-owned entities present a major fiscal risk to the economy, but two of them - SAA and the SA Post Office - will receive R8.5-billion in government funding, putting South Africa's carefully maintained expenditure ceiling at risk of a R3.9-billion breach.

Finance Minister Malusi Gigaba announced in his medium-term Budget policy statement on Wednesday that SAA would receive a further R4.8-billion, in addition to the R5.2-billion it received earlier this year.

This brings the total bailout of SAA to R10-billion in this financial year alone.

This is on top of the many other billions it has received from the government as it struggles to stay afloat on its own.

The financially troubled SA Post Office has also been allocated a cash injection of R3.7- billion as part of Gigaba's adjustments to the national budget presented by his predecessor, Pravin Gordhan, in February.

Gigaba managed to find new money for the embattled SOEs, despite drawing a line in the sand for the badly managed publicly owned companies.

"As the shareholder we are tired of being dragged into crises by those we employ to govern and manage state-owned companies. This must end," he said.

Gigaba said the government was also aiming to rope in a strategic equity partner as part of the turnaround plan for SAA.

He said that "recent years have seen several worrying developments with regard to state-owned companies, with governance failures, corruption, operational inefficiency and the need for government bailouts".

As a result they had developed "a poor reputation with the public at large" and had become "a major fiscal risk to the country due to government guarantees of their debt".

Total government guarantees issued to public institutions, independent power producers and public-private partnerships stand at R688.8-billion.

Eskom's is the largest at R350-billion.

In his speech, Gigaba listed Eskom's governance issues as "a major concern" and its "failures of governance, leadership and financial management of grave concern".