Zombie state-owned enterprises pose a major fiscal risk in South Africa

Issued by Alf Lees MP – DA Shadow Deputy Minister of Finance
07 Nov 2018 in News

The following speech was delivered today in the National Assembly by DA Shadow Deputy Minister of Finance, Alf Lees MP.

One of the most serious fiscal risks facing South Africa is the extent of debt that has built up in state-owned entities (SOEs) over the past nine years.

According to National Treasury, debt redemptions for the top 10 SOEs are expected to average R66 billion per year from 2019/20 to 2021/22. This amount exceeds government’s own debt redemptions over the same period.

From 2009/10 to 2016/17 the debt of the 10 top borrowing SOEs increased from R266.7 billion to R702.7 billion.

SOE debt is expected to increase by a further R300 billion to more than R1 trillion over the next three years.

National Treasury points out that these borrowings will increasingly be used to pay interest on the existing debt and, in the end, they will be borrowing just to service old debt. An untenable situation.

In the 2018 Medium-Term Budget Policy Statement, there are a total of four bailouts for SOEs, including a hidden bailout for the Gauteng e-toll project:

  • SAA – R5 billion
  • SA Express – R1.249 billion
  • South African Post Office – R2.947 billion
  • Gauteng e-tolls – R5.8 billion

The SAA turnaround plan requires total bailouts over the next three years of R21.7 billion. That money will be taken away from service delivery and the desperately required stimulus of growth in the South African economy and the creation of jobs.

Eskom has published plans to increase its borrowings from R388 billion to a massive R600 billion over the next three years.

In order to reduce the debt risks of SOEs, we have introduced two private members’ bills.

The first is the Public Finance Management Amendment Bill that will ensure real-time reports to Parliament and transparency of all government guarantees issued as well as those declined by the Minister of Finance.

The second is the Fiscal Responsibility Bill introduced by my colleague, David Maynier, that will control debt levels that government may wish to encumber South Africans with.

Without growth of at least 3% per annum, the number of unemployed South Africans will only continue to grow.