Treasury says no bailout approved for state firms

South Africa’s National Treasury denied that the government has approved a bailout package of R59 billion ($4.1 billion) for state-owned companies.

A cabinet meeting “is not a place where budget bids are tabled,” the Treasury said in an emailed response to questions after the Sunday Times reported the rescue plan was discussed at a cabinet meeting convened by President Cyril Ramaphosa last week. The South African National Roads Agency would receive a cash injection, while the Post Office, South African Airways and the South African Broadcasting would get guarantees to allow them to borrow more, the Johannesburg-based newspaper reported.

State firms under the rule of former President Jacob Zuma were plagued with ill governance and financial mismanagement. Government guarantees to state companies stand at more than R450 billion, according to data from the National Treasury. The state’s exposure to this increased to 64.5% in the fiscal year to March from 54.4% as companies drew on the guarantees.

Credit-ratings companies have flagged state firms’ finances as a concern in recent years. The Reserve Bank said in April the inability of these companies to roll over debt could threaten the nation’s financial stability and ultimately result in more downgrades after S&P Global Ratings and Fitch Ratings cut their assessments of South African debt to junk last year.

Finance Minister Nhlanhla Nene is scheduled to present his mid-term budget to lawmakers on October 24 and will have to balance increasing spending needs with tax income that’s under pressure in an economy that hasn’t expanded at more than 2% annually since 2013.

Spending bids that have been approved by cabinet will be announced in February or in the adjustments budget in October, the Treasury said.

The cabinet has not yet announced what it discussed or decided at last week’s meeting.