Finance Minister Enoch Godongwana has put his foot down on bailouts for ailing state-owned entities . Picture: Jairus Mmutle/GCIS
Finance Minister Enoch Godongwana has put his foot down on bailouts for ailing state-owned entities (SOEs), including beleaguered Transnet, as the entities now have to first comply with certain strict conditions.
Responding to questions at a closed media meeting before tabling the medium-term budget policy statement (MTBPS), Godongwana said he was unaware of a bailout in the mini-budget.
He then asked director-general Duncan Pieterse to confirm this. Pieterse said: “We don’t, you are correct, Minister.”
The 2023 MTBPS states that weak economic growth had compounded the poor financial position of most SOEs since 2019.
“Many companies are unable to attract funding at favourable rates and terms and rely on fiscal funding for support,” reads the MTBPS.
The MTBPS noted Transnet continued to experience weak profitability and deteriorating liquidity due to operational challenges.
It said a prolonged period of underinvestment in capital infrastructure and maintenance backlogs had continued to limit revenue-generating capacity.
“Transnet has initiated a five-year R122 billion capital investment programme, including R99.5bn for operational maintenance and R23.2bn to expand infrastructure, starting in 2023-24.
“Further borrowing is restricted by its existing debt, which stood at R130bn at the end of March 2023 and declining revenues.”
Asked why Transnet was not provided with a bailout after it made a request, Godongwana said they would avoid the temptation to respond to Transnet in the media.
“One thing we are not going to do is for entities to bargain with us in the media. We are not to make any commitments in the media,” he said.
Pressed that his budget speech somehow opened the door for the bailout of Transnet, Godongwana stated: “It is true that we have not closed the door but we are not opening it. We are realistic that at some point we need to find a solution for Transnet.”
Godongwana said their view was that Transnet should agree to a particular programme and that they would not just dish out funds.
“We are not closing the door. Even if we open it, it is not that wide,” he said.
Addressing Parliament afterwards, Godongwana said they acknowledged Transnet’s central role in moving goods and commodities to local and international markets, and the implications to business, people’s lives, the economy and the country’s global competitiveness when Transnet was dysfunctional.
He said no modern economy could thrive and grow new industries if rail lines were beset by delays and ports unable to efficiently handle incoming and outgoing cargo.
“Transnet’s performance in this regard has been underwhelming and its operations have been strained by a worsening financial state.
“Recognising the seriousness of the situation, the National Treasury is working with Transnet and the Department of Public Enterprises to ensure that Transnet can meet its immediate debt obligations,” he said.
Godongwana said broader reforms of the logistics sector would be guided by a freight logistics roadmap.
“The roadmap sets out a clear path for enhancing efficiencies, facilitating the introduction of competition and leveraging the financial and technical support of the private sector.
“Only once these three objectives are reflected in Transnet’s corporate and operational plans will there be a conversation about whether and how government can provide financial support to transform the logistics sector,” he said.
Cape Times
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