State-owned companies are racking up a hefty bill for taxpayers.
Duncan Pieterse, the head of asset and liability management at the National Treasury, says that extensive “recapitalisation initiatives” for state-owned companies through loan guarantees from the government are becoming an ever-growing fiscal risk.
“Customers have also complained about increasingly poor levels of service delivery. Compensation costs, in general, have far outpaced the growth of these businesses and have become a key factor in declining net profit or losses. Governments may make guarantee loans, in terms of the Consitution, to public institutions – only if the guarantee complies with the conditions of the legislation.
According to the National Treasury, governments’ exposure to contingent liabilities emanating from public entities is expected to reach R396.1 billion this year.The table below shows the value of the guarantees provided and the amount that has been given to embattled state companies:How much is it all costingPrior to this year, Eskom has received billions of recapitalisation, and it has not slowed down.
In the latest budget, the finance minister Enoch Godongwana proposed a two-component debt-relief arrangement costing a further R256 billion.In 2019, when the company entered business rescue, R22.8 billion was provided for recapitalisation. An additional R16.4 billion was then allocated over the 2020 period, said the Treasury.
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