How state-owned companies are burning through your money

Finance minister Pravin Gordhan’s mid-term budget has shown that National Treasury has a growing exposure to state-owned companies – which are burning through the country’s money.

Government’s “major explicit contingent liabilities” are its guarantees to SOEs, which stood at R469.9 billion at the end of 2015/16.

Total guarantee exposure was R263 billion at the end of 2015/16, “because several entities had not fully used their available guarantee facilities”.

These guarantees remain a massive risk on the country’s books, as they rely on the companies that receive them to use the money to run a successful business.

However, South Africa’s SOEs have proven time and time again they are not capable of running profitable operations.

The guarantee exposure (which is a higher figure than the government guarantees) of prominent SOEs are listed below:

  • Eskom – R170 billion
  • Passenger Rail Agency of South Africa – R53 billion
  • South African National Roads Agency Limited – R35 billion
  • South African Airways – R19.1 billion
  • South African Post Office – R4.4 billion
  • Land Bank – R6.6 billion
  • The Road Accident Fund – R155 billion

The graph below, courtesy of Economists.co.za, shows the government guarantees to state-owned companies and agencies over the last 10 years.

SOE

Now read: The one graph which should scare all South Africans

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How state-owned companies are burning through your money