Embattled SOEs SAA, Post Office & Eskom receive massive bailouts from the treasury

The South African Treasury has announced that state-owned entities, SAA and the Post Office have been allocated a combined R3.4 billion in bailouts.

This announcement was made during this year’s budget while the government has prioritised stabilising the power utility.

The deepening energy crisis has hit many sectors of the economy and the government will embark on a R254bn debt relief programme for the embattled power utility over the next three years.

BusinessTech Africa has learned that the funding for Eskom, which will be disbursed in three tranches until 2025/2026, is one of several measures to ease load-shedding.

Finance Minister Enoch Godongwana said they aim to ease pressure on its balance sheet so that it can, among other things, increase maintenance on its old and unreliable coal-fired plants.

“R337bn of Eskom’s debt is already government guaranteed. Explicitly taking on this debt will reduce financial risk and enhance long-term fiscal sustainability,” said Godongwana.

“Additional funding is to be considered subject to strict conditions to allow the strategic equity partnership deal to be finalised. As a condition of such funding, all government guarantees to SAA will be cancelled.

“The allocations for these state-owned companies will be accompanied by strict conditions to ensure sustainability, accountability, and transparency. If the conditions are not met, the money will not flow.”

Looking at SAA, the bailout has been allocated for historical debt as the airline pushes ahead with taking the Takatso Consortium — which will own 51% of the airline — as its strategic equity partner.

Godongwana announced that the amount is in addition to the R16.4bn granted to the airline to complete its nearly two-year-long business rescue process, which it exited in 2021. 

The Post Office has been allocated R2.4bn as the state-owned postal service prepares to close numerous branches and retrench 6,000 workers over the coming months.

“The department of communications and Digital Technologies should ensure that a clear plan is developed and implemented to address the issue of 6,000 Post Office workers who are about to lose their jobs; and that the issue of statutory payments, such as to the Unemployment Insurance Fund (UIF), medical aid schemes and pension funds, is also addressed,” the Treasury said in the budget documents per BusinessLIVE.

“Failure to transfer statutory payments is unacceptable and consequence management must be implemented immediately. A progress report should be provided in this regard in the next budget cycle.”

In the decade to the end of the 2021/2022 fiscal year, various State-owned enterprises received a cumulative R266.6bn from the government.

“Many state-owned companies remain unable to adequately fund their operations and debt obligations and are even less able to optimally invest in infrastructure. Underspending on capital projects may in turn undermine broader economic performance,” the Treasury said.

“It [the SOE conditions] aims to link bailouts of these entities to a range of reforms needed to make them sustainable and efficient.”