Gigaba: Govt guarantees act as perverse incentives for SOEs

Finance Minister Malusi Gigaba says there is impetus within Treasury to change the framework for government guarantees.

FILE: Finance Minister Malusi Gigaba delivers his maiden Medium Term Budget Policy Statement on 25 October 2017. Picture: GCIS.

CAPE TOWN - Finance Minister Malusi Gigaba says government guarantees, in the absence of stringent conditions, act as perverse incentives for state-owned companies.

Gigaba was speaking at an event attended by business people in Cape Town earlier on Thursday.

It comes a day after he announced that the government is allocating just over R13 billion to the ailing national carrier and the Post Office.

Gigaba says there is impetus within Treasury to change the framework for government guarantees.

“So that we become more stringent, there’s no way that we should continue providing government guarantees for operational expenditure for waste. In that case, the government guarantees to serve as a perverse incentive. We need to put that to an end and ensure that we provide it only in the instance where it’s going to support capital expansion.”

(Edited by Zamangwane Shange)