SOEs in financial distress despite billions of government bailouts

SOEs in financial distress despite billions of government bailouts

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The Democratic Alliance (DA) says the government’s endless bailout strategy of State Owned Entities (SOEs) has failed. 

The sentiment comes after the National Treasury tabled the third-quarter government expenditure report to Parliament’s Appropriation Committee on Wednesday, 14 February. 

TREASURY REPORT CONFIRMS SOEs ARE IN FINANCIAL DISTRESS

The DA said the report confirms that multiple state-owned companies that have received bailouts in recent years remain in financial distress and are still bleeding money at an alarming rate. 

Here’s how much money the government has spent on SOEs: 

  • Eskom: Receiving R254 billion in bailouts between 2023 and 2025, has recorded a loss of R7.5 billion up to the end of fiscal Q3 2023/24. 

Notably, municipal debt to Eskom has grown by R16.9 billion over the same time frame from the preceding financial year and now stands at a whopping R75.4 billion. 

Eskom sales have declined by 5.1% yearly, but primary energy costs have risen by 12.4 billion.

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  • Land Bank: According to the report, the SOE, which has been in default on its debt obligations since 2020 and has been subject to recapitalisation from the State, as of 31 December 2023, recorded a net loss of R97 million (It had budgeted to achieve a profit of R99.4 million).
  • SAA: South African Airways was given a R10.5 billion bailout in 2020 and a further R1 billion in 2023. In the Q3 report, SAA reported a net loss of R761 million against the budgeted profit of R92 million for the period under review. SAA needs to catch up to its revenue targets by R900 million.
  • Transnet: The freight rail company could not meet maturing debt obligations of R14 billion due by the end of the financial year, and the Finance Minister has given the entity a massive R4 – 7 billion debt guarantee.
  • Denel:  The aerospace company was given a whopping R3,3 billion bailout in 2022 and lost R463 million at the end of the quarter, against a budgeted loss of R339 million.
Rank SOE  Bailouts (2018 to 2023)
1. Eskom R181 600 000 000
2. SAA  R37 136 000 000
3. Denel R9 027 586 261.73
5. Transnet  R5 837 000 000
TOTAL R233 600 586 261.73 
How much government has spent bailing out SOEs

DA WEIGHS IN ON GOVERNMENT BAILOUTS 

DA Deputy Shadow Minister of Finance Ashor Sarupen said alarming financial distress exhibited by multiple SOEs, demonstrates that the bailout strategy has failed. 

Sarupen said the ongoing bailouts now threaten long-term fiscal sustainability and the ability of the State to deliver services and deliver on infrastructure needs.

ALSO READ: Government to bail out SOEs and ‘take over’ Eskom’s R400B debt

“The DA’s long-standing opposition to these indiscriminate bailouts is based on the fact that these bailouts divert funds that should be used to supplement hard-pressed services such as healthcare, education, and policing.

“The government needs to accept that SOEs are now in a death spiral due to the long-term impacts of mismanagement and cadre deployment. The endless bailout strategy has failed. Should the state insist on continuing down this path, it will result in economic instability, reduced investor confidence, and hindered overall growth,” Sarupen added. 

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