Godongwana: No more easy bailouts, just 'tough love' for SOEs

The new finance minister delivered his maiden Medium-Term Budget Policy Statement in Parliament on Thursday afternoon with state-owned entities listed as a fiscal risk in the budget documents.

Finance Minister Enoch Godongwana delivers his maiden Medium-term Budget Policy Statement in Parliament on 11 November 2021. Picture: GCIS.

CAPE TOWN - Finance Minister Enoch Godongwana is holding the line on bailing out state-owned enterprises (SOEs), saying there would be no more easy money for them, only “tough love”.

The new finance minister delivered his maiden Medium-Term Budget Policy Statement in Parliament on Thursday afternoon with state-owned entities listed as a fiscal risk in the budget documents.

Briefing the media before tabling the statement, Godongwana said he would be more tight-fisted with government finances going forward.

State arms manufacturer Denel, South African Airways, and power utility Eskom are among the country’s strategic SOEs that received billions in government bailouts in recent years.

Denel received R2.9 billion to settle debt repayments and SAA received R21 billion in the last financial year alone.

Eskom is a dual threat, with rolling power cuts hindering growth prospects and posing a significant risk to public finances because it relies so heavily on government guarantees.

Godongwana said there would be no more easy bailouts.

He said: "Our posture at the moment, there’s no incentive for our people to work hard and be efficient and make sure we can derive value for money. So that’s what we are going to be demanding before we start bailing people out."

Godongwana said those entities facing closure would not necessarily be rescued by the state.

"We are not going to say every state-owned enterprise, oh God it must not fail. I said tough love. Some will have to fall," said Godongwana.

Treasury said access to capital markets had become more restricted for SOEs, adding to their financial woes. The interest on the debt paid by the biggest borrowers grew by 230% since 2010.

JULY UNREST

Godongwana referenced the unprecedented riots and looting that rocked South Africa in July.

"These incidents exposed the fragility of South Africa’s social, economic and political compact," he said.

As a result of those riots, government extended the special COVID-19 grant until March 2022, but the action also reopened the debate around a basic income grant, with mounting pressure from some on Godongwana to start planning for one.

"Details on our interventions with regards to the social security net will be provided in the February 2022 Budget," he said.

But whilst promising to support the most vulnerable in society, Godongwana also acknowledged the heavy burden social grants place on the fiscus with 46% of the South African population receiving some kind of social grant.

The social relief distress grant will come to an end as planned in March next year and Godongwana said if government wanted to extend this, it would have to repurpose funds from other departments and projects.