Budget2020: R129 billion into the SOE black hole
South Africa's ailing state-owned entities will be getting a massive R129 billion cash injection and, predictably, the bulk thereof will go toward the limping state power utility.
Finance Minister Tito Mboweni has come under fire from the DA over his admission that part of the IMF loan could be used to pay salaries. Picture: Emmanuel Croset
State-owned entities (SOEs) will be boosted with a further R129 billion over the next three years, with the majority of this expenditure going towards Eskom.
SOEs will receive less financial support from the government as the National Treasury looks to get a handle on rising debt.
Eskom and energy
The power utility reported a net profit of R1.3 billion at the end of September last year, but it failed to generate enough revenue to cover debt and financial costs. This was partly due to non-payment by municipalities and other consumers.
Government will transfer R112 billion to Eskom to enable the utility to meet its short-term financial obligations over the next three years as it begins the unbundling process of separating the utility into three units – generation, transmission and distribution – which will soon have its own board and management structures.
The debt-ridden utility had already received a conditional R105 billion in 2019/20 and 2020/21 to improve accountability and address inefficiencies.
But electricity shortages are expected to constrain economic growth. Energy expenditure is expected to total R150 billion in the next three years, with a fifth going to infrastructure spending.
R16.4 billion has been allocated to the Integrated National Electrification Programme which will fund 560 000 new connections to the power grid over the medium term. 15 000 households will be provided with stand-alone power system connects per year.
Government will transfer R15.7 billion to municipalities and Eskom to fund this programme over the medium term.
South African Airways
Since last year’s budget, government has agreed for large increases to be transferred to the dysfunctional power utility and the ailing South African Airways.
South African Airways, which is currently under business rescue, will receive R16.4 billion over the medium term to repay guaranteed debt and interest costs.
Additional funding was anticipated to cover restructuring costs in line with the business rescue plan.
R3.2 billion was allocated to the public broadcaster in 2019/20. R2.1 billion has already been transferred to assist the broadcaster to pay its bills. The remaining R1.1 billion is expected to be transferred by 31 March 2020.
The defence equipment manufacturer will get additional funding of R576 million in 2020/21 financial year on top of the R1.8 billion provided by government in 2019/20.
This was to address the serious liquidity problems facing the state-owned entity. But such aid comes with conditions that Denel speedily implement its turnaround plan. Government found it critical to define Denel’s role in a modern defence industry.