Factbox: SA’s struggling SOEs

A roundup of the country’s rapidly sinking state-owned firms.
Passenger trips on Prasa's trains have fallen to 208m in 2018/19 from 516m in 2014/15. Image: Moneyweb

South Africa is grappling with multiple problems at its heavily indebted state-owned firms, the most serious of which are at ailing state power utility Eskom.

President Cyril Ramaphosa has made turning around Eskom and other failing state companies a priority as he struggles to reverse years of stagnant growth, injecting billions of rand in rescue funds.

But the problems show few signs of abating, with the biggest power blackouts in a decade shutting down mining operations across the country this week, while the national airline has been placed into a form of bankruptcy protection.

The support has contributed to a fourfold rise in the country’s debt over the last 10 years, pushing it past the 60% of GDP threshold seen as red-line by ratings agencies and investors.

Below are some of the state firms which are being kept afloat with bailouts that the government is growing increasingly reluctant to grant.

Eskom

In October the Treasury said Eskom, which provides 90% of the country’s power but has battled to keep the lights on since 2008, was the “most serious risk” to its fiscal position owing to mostly-government backed debt of nearly R500 billion.

Read: SA unveils next steps to rescue Eskom

The utility has total nominal capacity of around 44 000 megawatts (MW) but has struggled to keep pace with demand because its coal-fired power stations are so unreliable.

The government has granted Eskom R230 billion over the next 10 years and in October gave it an additional R26 billion in emergency funds.

The following month the company said it expected to make a loss of around R20 billion for the year ending March 2020.

It is also fighting the energy regulator in court to grant it double digit tariffs increases for the next three years to plug a R100 billion revenue hole.

Ramaphosa has initiated a break up of Eskom over the next three years to increase competition, hoping to sell off parts of the monopoly.

SAA

Ramaphosa instructed the government this month to put South African Airways (SAA) into a business rescue – a form of bankruptcy protection – after an eight-day strike in November left it close to collapse.

Formed in 1934, SAA is one of the world’s longest-established airlines but the state-owned carrier has not made a profit since 2011. It made losses of more than R5 billion in each of the past three years, according to company documents reviewed by Reuters.

Read: Bye bye SAA

In October, the Treasury said cumulative losses were R28 billion since 2006, adding the airline was insolvent and “in its current configuration, unlikely to ever generate sufficient cash flow to sustain its operations.”

Public Enterprises Minister Pravin Gordhan said bailouts for the airline have amounted to more than R20 billion in the past three years.

Denel

Denel is the largest manufacturer of defence equipment in Africa, making military kit for theSouth African armed forces and clients in Africa, the Gulf and Europe.

Read: Denel struggling to pay wages

The company said in March it was technically insolvent, recording a loss of R1.9 billion while struggling to pay salaries and suppliers, prompting the government to hand it a R1.8 billion bailout in August.

The government’s total debt guarantee for the arms maker is R4.4 billion.

SABC

The South African Broadcasting Commission (SABC) was granted a R3.2 billion bailout in October as it continued to bleed viewers and with revenue sinking after years of mismanagement that led to the firing of its entire board in 2018.

Read: Does the SABC need 12 directors?

The national broadcaster recorded a net loss of R482.4 million in 2018/19 after a R622 million loss in the previous year. It has said it is considering layoffs. The company’s total liabilities are R3.8 billion.

Sanral

The South African National Roads Agency Limited (Sanral) has suffered average annual losses of R1 billion since 2014/15.

Read: Sanral e-toll revenue slumps 63% in year to March 2019

The road authority had already used R30.3 billion of its R39 billion government guarantee by March, having struggled to break even on a network of electronic highway tolls in the economic heartland of Gauteng.

A majority of drivers have refused to pay the tariffs, leaving the firm deep in the red.

Prasa

The Passenger Rail Agency of South Africa (Prasa) went into administration this week. It said in its annual results that it offered a “service that is poor, unreliable, unpredictable and that is not safe”. Passenger trips have fallen to 208 million in 2018/19 from 516 million in 2014/15.

In the 2018/19 financial year, the rail operator posted a R1.8 billion loss.

The Treasury has granted Prasa R41.5 billion over the next three years to modernise the rail network.

Read: Prasa placed under administration – minister

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This is what you get when you are “challenged” enough to believe a socialist political solution will fix the problems.

In addition you are “challenged” to such an extent that you keep making the same mistakes. Over and over again.

Only the ANC and partners.

100 % Mmmm, not that different to when your Tea Lady at the office comes to you for about 100 month in a row with the same old problem , “Boss, the sugar she’s finished”!! But she’s not driving an expensive German luxury car, and on the gravy train, at your expense, otherwise no difference!!

“The people” of SA are GRAPPLING with stuff that largely stems from foreign, western concepts. In the same way “corruption is a western concept” to Mr Zuma!
(It seems like electricity is from the devil?) The more SA becomes controlled & influenced by people who subscribe to tribal & socialist views….and the lesser controlled by knowledgeable racist colonialists….then more you’ll see features of a modern, western civilization to wane/disappear, as it will get too costly to maintain/uphold in a 3rd world environment. Reverting back to mean average of continent, “terug na die bos”.

While not taking away any compliments from the people, for one knows they are really TRYNG THEIR VERY BEST (despite paid to do competent jobs, for which many are ill-equipped to do so. What labour law can SA thank for that??).

Many of the ill-equipped now grapples how to plug a leaking ship’s hold, nor how to launch life-rafts…

A definite challenge here is the dogged determination to appoint people in top management and all other positions who clearly do not appreciate the importance of maintenance of infrastructure, all in the name of ’empowerment’.
Two errata on the article: Ramaposa did instruct for SAA to go into business rescue only AFTER Solidarity was on the verge of obtaining a court order for same. The ‘C’ in SABC stands for Corporation, not Commission. Just like the ‘e’ in South Africa stands for electricity…

“Just like the ‘e’ in South Africa stands for electricity…”

Need to remember this one. Well done.

Jus looking forward to NHI …

We all going to early graves ……

End of comments.

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