In the past few years, State Owned Enterprises (SOEs) have become synonymous with corruption. They are casualties of state capture, and blatant examples of the endemic corruption that has the public sector of our country in its vice-like grip.
(With, of course, a not insignificant number of willing private sector accomplices thrown in).
And despite the best efforts of the Zondo Commission and other anti-corruption initiatives, the fallout from years of mismanagement, corrupt practices and blatant greed continues to astound us.
Just the other day, for example, on December 8, 2020, business, labour and government signed an agreement stating that money from the Government Employees Pension Fund (GEPF) would be used to fund yet another bailout for Eskom.
Geordin Hill-Lewis, the DA’s Shadow Minister of Finance called the deal, initially proposed by Cosatu, a betrayal of workers and the public.
Which, of course, it is.
And it begs the question: Who will end up paying when the government can no longer afford to pay public pensions?
The answer? The public at large. You, me, and all the other hard working, tax paying South Africans who have, quite simply had enough of watching the government extend bailout after bailout to failing SOEs.
Of course, the government has said it will pay back the GEPF but forgive me if I’m not over-filled with confidence that this will indeed happen, given the current precarious state of our national finances.
But even if we park our moral outrage at people’s financial futures being so carelessly played with, all the government is effectively doing with this – and all the other SOE bailouts – is throwing money at the problem.
And we all know what that does! Instead of making the problem go away, you simply end up with a more expensive problem.
Eskom doesn’t generate enough cash to meet its costs. It hasn’t done for a longer time now than we care to remember. It survives on government bailouts and has a current debt pile of R454 billion – two thirds of which is guaranteed by the government.
It’s an example of corruption at its finest and it is slowly but surely hollowing out and killing our country.
The Best (Or Worst) Of A Bad Bunch?
Of course, Eskom is not the only example of our government throwing good money after bad management.
Sadly, you don’t have to look too far before you bump into another failed SOE with its greedy hand out.
Last month, we learned that the government had eased the terms of the R576 million bailout given to the state defence company Denel, which is facing a liquidity crisis and is unable to pay some of its staff their full salaries.
In 2015, former Denel Land Systems CEO Stephan Burger blatantly disregarded the company’s procurement policies and awarded a contract worth nearly R200 million to VR Laser, despite it tendering R100 million higher than Denel subsidiary LMT.
No surprise that VR Laser just happened to be owed by Gupta lieutenant Salim Essa, and Duduzane Zuma, the son of then President Jacob Zuma.
Clearly there can be nothing left in the coffers now though, hence the need for a bailout just five years later.
“It was a bad decision, admitted Burger. “The mere fact that Denel is bankrupt shows that it was a bad decision.”
No sh*t, Sherlock.
South African Airways
Of course, what story on the sorry state of South Africa’s SOEs would be complete without South African Airways?
Towards the end of October this year, the government announced it would give SAA (yet another) bailout, this one to the tune of a staggering R10.5 billion. This is in addition to the R16.4 billion the struggling airline received in February this year, ostensibly to settle debts and cover interest payments.
When you start borrowing money to cover interest payments on previous loans, there’s definitely something wrong with this picture.
The popular theory is that SAA needs the money to help it recover from the effects of the COVID-19 global pandemic, which has all but grounded airlines around the world. And if this were the case, we could almost sympathise.
But SAA has been in deep trouble for years. In fact, it hasn’t made a profit for the past decade, and was placed under administration in December last year after years of losses caused from rising debt and blatant mismanagement.
Prior to the October bailout, the government had stated there was nothing left in the pot for its many limping SOEs. So, it’s safe to say this latest funding will come from spending cuts in other areas.
The South African Post Office
How could we not include the Post Office? It recorded a loss of nearly R1-billion in the first quarter of 2020 – almost the same amount as it lost in the entire previous year.
The loss comes at a bad time (not that there really is a good time for this kind of financial crisis). The Post Office board is currently entangled in a battle with Communications Minister Stella Ndabeni-Abrahams over alleged interference.
Its financial position is so dire it’s asking for more than R7-billion simply to stay afloat.
When we will see the writing on the wall?
South Africa “has one of the highest public ownership of firms with an extended scope in the economy among Southern African and Organisation for Economic Co-operation and Development (OECD) countries,” says the OECD.
“Such a prevalence of public entities has effects on the competitiveness of the economy through the cost of intermediate goods and competition in these sectors. In the case of South Africa, where most public firms are underperforming, it has detrimental effects on the cost of doing business.”
Something has to be done, and it’s definitely NOT another bailout.
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