In its price range evaluate, the treasury flagged Transnet’s excessive debt ranges, saying it must make quicker progress on its plan to enhance operations and funds
The treasury is not going to present bailouts to struggling state-owned enterprises within the 2025 price range and can as a substitute deal with bettering governance at these entities, it reiterated on Wednesday.
Public and state-owned entities, together with Transnet and Eskom, have posed a serious threat to South Africa’s fiscal place, the treasury stated in its 2025 price range evaluate tabled in parliament by Finance Minister Enoch Godongwana, noting that a lot of the nation’s contingent liabilities emanate from them.
“For over a decade, most state‐owned corporations … haven’t met the authorized necessities to keep up sustainable profitability, handle dangers successfully and generate returns whereas making certain prudent use of public assets,” the treasury stated.
“Varied initiatives, together with turnaround plans agreed with authorities, are underneath approach, however progress has been blended. Notably, Eskom and Transnet are implementing restoration plans agreed to throughout 2023/24.”
Transnet posted a lack of R7.3 billion for the 2023-24 monetary yr — worse than the lack of R5.7 billion within the prior yr — largely resulting from elevated finance prices, whereas further debt and better rates of interest pushed finance prices to R14.3 billion in 2023-24, putting additional pressure on money flows, based on the evaluate.
The treasury stated, as a substitute of bailouts for state companies, the federal government would apply itself to bettering governance and transparency at these establishments.
“As well as, authorities will assist essential capital investments by way of completely different mechanisms, together with credit score ensures, on-lending and grant funding, the place applicable,” it stated.
In its 2023 price range evaluate the treasury introduced the federal government’s resolution to offer Eskom with debt reduction amounting to R254 billion to strengthen its steadiness sheet, restructure the enterprise and put money into upkeep.
On Wednesday, it stated that, by 31 March this yr, the federal government would have superior R140 billion in debt reduction to Eskom. This, it stated, was a discount of R4 billion from the unique quantity projected up up to now “owing to the utility’s failure to fulfill the deadline for the disposal of the Eskom Finance Firm”.
“Because the settlement strikes in the direction of closure, authorities has determined, in session with Eskom, to simplify the ultimate part of the debt reduction — a change that additionally displays some enchancment within the utility’s monetary place flowing from the interventions so far,” it stated.
“The ultimate R70 billion debt takeover will now get replaced with two advances amounting to R50 billion: R40 billion in 2025-26 to redeem debt maturing in April 2026 and R10 billion in 2028-29 for debt maturing in Might 2028. In abstract, over the five-year interval, authorities may have offered Eskom with loans to the worth of R230 billion to help the utility in repaying its debt.”
Over the following three years, an estimated R1.03 trillion has been allotted to spending on public infrastructure tasks by state-owned corporations, in addition to nationwide, provincial and native governments.
This consists of R402 billion for highway infrastructure, with R100 billion in investments by the South African Nationwide Roads Company, whereas R219.2 billion will go in the direction of vitality infrastructure and R155.3 billion will probably be spent on water and sanitation infrastructure.
The treasury stated, since 2018, Transnet had shifted funds from capital expenditure to debt servicing. However whereas this had prevented default, the shift had come “on the expense of sustaining and increasing essential infrastructure”.
It stated the federal government had offered a R47 billion assure in December 2023, which the freight and logistics utility used to “refinance maturing debt and tackle new debt”.
The federal government is supporting essential infrastructure tasks, such because the enlargement of the landside container terminal in Cape City, whereas avoiding debt reduction or normal steadiness sheet assist, treasury stated.
Final month, Transnet acquired a R892 million fleet of straddle carriers and gantry cranes on the Port of Durban, a part of the primary batch of greater than 100 items of apparatus to be delivered to the port this yr to spice up its cargo-handling capability and get it again on observe.
Extra gear to be delivered to Durban Container Terminals in 2025 embrace 4 ship-to-shore cranes, 40 haulers and 67 trailers, with arrival scheduled from April to December. Port Elizabeth Container Terminal will take supply of 12 straddle carriers, whereas Cape City will obtain 28 cranes and straddle carriers within the 2026 monetary yr.