‘No More Government Bailouts’ For SOEs: Public Works DG

DURBAN – DEPARTMENT of Public Enterprises director-general Kgathatso Tlhakudi said the government would no longer be funding bailouts for state-owned enterprises (SOEs).
According to the National Government Directory, there are 129 state-owned enterprises and other public entities. Some of the SOEs that received bailouts recently were Eskom and SAA.
Tlhakudi said the era of funding operational shortfalls is over.
He addressed Parliament’s Public Enterprises committee recently during a departmental briefing.
“Bailouts, financial contributions to SOEs or recapitalisation will be given when an entity is restructuring itself so that it is sustainable under its own steam going forward,” he said.
Tlhakudi emphasised that the government was still allowed to explore expansion opportunities that availed themselves within SOEs.
“Where there are opportunities to grow the business, where there will be positive cash flows in line with best practice, funding will be provided under those conditions. But funding of bailouts as we know them, where businesses continue to declare losses and must be propped up to continue operating, that will no longer be acceptable. It is the right way to go because as we know there are many other demands put on our fiscus.”
Tlhakudi gave an update on the delayed but on-track restructuring of SAA subsidiaries Mango Airlines, SAA Technical and Air Chefs.
“We made a commitment to ensure that the subsidiaries are restructured… it took longer than planned because you need to have funding available if you are going to restructure. The R2.7 billion only became available this year in the budget… we are in the process now of restructuring these entities.”
Both AfriForum and the DA felt that the collapse of SOEs could have been and could still be prevented through the privatisation of the entities.
“If we look at it cosmetically, it is the right call. Tlhakudi left a back door open by stating that they will still do business where opportunities prevailed,” said Jacques Broodryk, AfriForum’s spokesperson.
He said SOEs should have been privatised years ago in order to allow them to compete effectively and thus improve their services and cut costs.
“The government is unlikely to longer fund bailouts. The government has been making promises about putting an end to corruption and patronage for years. According to the Special Investigating Unit, corruption has reached unprecedented levels.”
The DA felt that Tlhakudi’s newly proposed expansion opportunities were misleading since re-capitalisation led to the current collapse of SOEs.
“Tlhakudi is obfuscating by saying that bailouts will only be given for recapitalisation when all the bailouts in process and under consideration at present are a direct consequence of what he refers to as ‘operational shortfalls’,” said DA MP Alf Lees.
“Under no stretch of the imagination can the taxpayer funding of SOEs be classified as investments of additional capital in order to grow the businesses and their profits, i.e. the so-called re-capitalisation.
“The only real way of stopping these bailouts is to privatise those SOEs that are attractive to the markets or shut down those the market rejects.”