Zooming in to SOEs ahead of SONA

When he delivered the State of the Nation Address on 13 February 2020, President Cyril Ramaphosa announced the government’s move from stabilising the State-Owned Enterprises to repurposing the companies to support economic growth and development.

The plan aimed to ensure financial sustainability of the enterprises.

“After years of state capture, corruption and mismanagement, we are working to ensure that all SOEs are able to fulfil their developmental mandate and be financially sustainable,” Ramaphosa said.

It is a year later and some may argue that some SOEs are in more distress now than last year when the speech was delivered, three weeks before the first case of coronavirus was confirmed on 5 March.

During his speech last year President Cyril Ramaphosa noted the negative impact of load shedding on the economy. “The load-shedding of the last few months has had a debilitating effect on our country. It has severely set back our efforts to rebuild the economy and to create jobs. Every time it occurs, it disrupts people’s lives, causing frustration, inconvenience, hardship,” he said.

He, however, added that load shedding will remain a reality for South Africa in the foreseeable future. “Where load shedding is unavoidable, it must be undertaken in a manner that is predictable and minimises disruption and the cost to firms and households.”

Eskom is struggling to deal with power supply as a result of its ageing infrastructure. True to President Ramaphosa’s word, load shedding remains a reality. Last month the power utility implemented stage two load shedding to manage emergency generation reserves and identify risks to the power system. South Africa loses up to R900 million a day due to load shedding:

WATCH: Economist Mike Schussler says South Africa is currently losing between R700 and R900 million a day due to the ongoing load-shedding implemented by power utility Eskom.

The power utility’s debt has been increasing over the years. Last year, it reported that its debt has escalated to R440 billion and a net loss of R20.5 billion. The government continues to support the state entity.

When he tabled his budget speech in February 2020, Finance Minister Tito Mboweni announced that R112 billion would be allocated to Eskom over the three years 2020-2023.

The power utility is in a process of unbundling into three divisions, generation, transmission and distribution. In March 2020, boards and managing directors were appointed for the divisions. It has set the deadline to do this for 2022.

Energy expert Andil Nchabeleng discusses the unbundling of Eskom:

Tension continues between the South African Airways (SAA) and unions. This week, the Labour Court reserved judgment in a dispute between unions and SAA Business Rescue Practitioners. Unions, the National Union of Metalworkers of South Africa (NUMSA) and the South African Cabin Crew Association (SACCA) last week filed an urgent court application to declare unlawful the practitioners’ decision not to pay union members their salaries.
Numsa and SACCA want the Department of Public Enterprises and the airline’s business rescue practitioners to pay over three months of deferred salaries to their members. Workers at the airline have not been paid since March 2020.

WATCH: Trade union NUMSA and the SAA Cabin Crew Association have challenged the non-payment of salaries to their members by SAA’s Business Rescue Practitioners.

Addressing the nation last year, Ramaphosa noted that the airline was negatively affected by state capture, corruption and mismanagement.

“In the interests of South Africa’s aviation industry and our economy, it is essential that a future restructured airline is commercially and operationally sustainable and is not dependent on further government funding.”

The SOE has continued to receive money from the government. In February 2020 R16.5 billion was allocated to the airline and it received an additional R10.5 billion in October 2020.

Judgment on the labour court matter is expected later this week.

State-owned arms manufacturing company is also struggling to keep afloat. Unlike SAA, Denel received no funding when Finance Minister Tito Mboweni tabled his mid-term budget in October.

The organisation reported a net losses of R1.96 billion in the year that ended in March 2020. It released its financial results on 1 February 2021 after the Johannesburg Stock Exchange threatened to suspend its bonds. Denel was hard-hit by the coronavirus pandemic.

In May 2020, the company reported that it could not complete orders worth R101 million because of the coronavirus pandemic. It struggled to pay salaries and also considered job cuts.

In the 2018/2019 financial year, it made a loss of R1.47 billion. The company is continuing to implement a turnaround strategy that involves the exiting of its aerostructures manufacturing.

Things have been gloomy at the South African Broadcasting Corporation (SABC). The public broadcaster has concluded the implementation of Section 189. In January, SABC resumed the retrenchment process by issuing letters of redundancy and surplus to affected staff. This was after the process was halted in November 2020 amid protests by the workers.

The process which affects just over 300 workers has been met with resistance from the unions, the Communications Workers’ Union and Broadcasting, Electronic, Media & Allied Workers Union and different political parties have advised against the job cuts.

However, the public broadcaster has argued that the salary bill is unsustainable. Appearing before Parliament in 2020, the board said it needed to reduce R700 million a year on staffing costs.

At the end of March 2020, the organisation reported a net loss of R511 million.

WATCH: Unions representing SABC staff have again threatened court action and industrial action over Section 189 retrenchments. 

The officer of the Auditor General last week revealed that the financial situation at the Passenger Rail Agency of South Africa (Prasa) has not improved. Briefing the Standing Committee on Public Accounts (Scopa) on the 2019/2020 audit outcomes, the office disclosed that Prasa incurred R28.6 million billion in irregular expenditure. The figure stood at R27.2 billion in 2018/19 financial year. Business Executive at AG’s office Polani Sokombela attributed the State-Owned Entity’s financial woes to poor discipline and non-compliance with legislation.
The rail agency has also seen a spike in fruitless and wasteful expenditure. The expenditure has increased from R383 million 2018/2019 to R432 million in the 2019/2020 financial year.

Some of the challenges that have led to the status quo have been laid bare at the State Capture Commission. Former Chairperson of Parliament’s Transport Committee Dikeledi Magadzi told the Commission of Inquiry into State Capture this week that it was difficult to carry out their oversight obligations as a result of the high turnover of executives.

Magadzi said during her tenure there were three ministers, four boards and many executives which led to instability at Prasa. They faced challenges in getting documents on the modernisation plans for Prasa.

She testified that the company did not have any annual plans or strategic planning vision for the years 2014 to 2019.

The instability hampered the portfolio committee’s efforts to follow up on allegations of the trains that were bought by the Prasa but were not fit for purpose.

Minister Fikile Mbalula has described Prasa as a broken organisation that struggles to provide efficient commuter and passenger rail service. Commuters that rely on trains to get to work will be interested to hear from the President how this will be changed.

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Source: SABC News (sabcnews.com)