Budget Speech 2024: Failing SOE’s out in the cold

Finance Minister Enoch Godongwana’s budget speech did not announce any new bailouts to State-Owned Enterprises (SOEs), which he says have failed to implement their turnaround plans, including power utility Eskom.

“While the financial position of state-owned companies rebounded after the Covid-19 pandemic in 2021/2022, the tough economic environment and historically poor operational performance meant that their overall financial position deteriorated in 2022/2023,” said Godongwana.

ESKOM DEBT RELIEF PLAN INTRODUCED TO IMPROVE FINANCIAL MANAGEMENT

The Eskom debt-relief plan was introduced to address this, the SA Post Office was placed in business rescue, and a guarantee framework agreement was concluded for Transnet.

In the 2022 Budget Speech, Eskom was allocated a debt-relief arrangement of R254 billion over three years; R78 billion was earmarked for the 2023/2024 financial year.

ALSO READ: Budget Speech: Focus shifts to energy security

BUDGET SPEECH 2024: ‘WE’LL RELEASE INDEPENDENT REVIEW REPORT ON ESKOM,’ SAYS GODONGWANA

“We will release the report on the independent review of Eskom’s coal-fired power stations in the coming week. The review was done to inform part of the conditions attached to the debt relief plan,” said Godongwana.

He said that in December 2023, the government provided an R47 billion guarantee to Transnet to assist with maturing debt and implementing a recovery plan. Approval has been granted to use only R14 billion between December 2023 and March 2024 to pay off maturing debt.

TRANSNET’S CONSISTENT BELOW-TARGET PERFORMANCE HIGHLIGHTED IN BUDGET SPEECH

“Transnet has consistently registered below-target financial performance across its operating divisions due to a combination of economic factors, operational inefficiencies, and the effect of shocks such as the KwaZulu-Natal floods on operations and infrastructure,” said Godongwana.

He said insufficient revenue collection and high operating costs continue to reduce the cash available to fund SOEs. As a result, they are struggling to access capital markets without government guarantees and financial bailouts to service debt and fund turnaround plans.