The South African economy has taken some hard knocks of late, leading us into a recession.

The new Minister of Finance, Tito Mboweni, has now been handed the rather difficult job of fixing the economy.

As unemployment rates continue to climb, both Mboweni and President Cyril Ramaphosa are going to have to make some drastic changes to turn things around.

The president has already signed a bill introducing a fixed minimum wage. Their next, and most daunting challenge, will be dealing with our money-draining state-owned enterprises (SOEs), reports MyBroadband.

Let’s start with Eskom. Business Day writes that the power utility, which supplies about 90% of SA’s energy needs, has doubled its debt service costs in just a single year to R45 billion.

As a result, Eskom is being cited as the single biggest risk to the South African economy. That said, it’s being helped along on the path of economic destruction by other money-haemorrhaging SOEs like SAA, the SABC and the SA Post Office.

One of the biggest talking points that came from Mboweni after his appointment was his R5-billion bailout for SAA, as well as a R2.9-billion bailout for the SA Post Office.

This decision frustrated many South Africans due to these organisations’ reputations for incurring repeated, heavy losses.

Mboweni noted that many state-owned companies need to be reconfigured, highlighting SAA as an SOE that needs “radical measures” to be taken.

Ramaphosa has referred to SOEs as “sewers of corruption”, so he’s clearly not a fan.

Recently, SAA’s interim CFO Deon Fredericks said that companies who are engaged in contracts with SAA are cutting their settlement terms from 21 days to 7.

This is seemingly an attempt by these suppliers to get their money before any possible SAA financial collapse.

SAA is also struggling to pay lenders R5 billion, which is due before the end of November.

Even if this payment is made, SAA will have to find another R9.2 billion in short-term loans by the end of March 2019.

Democratic Alliance leader Mmusi Maimane has called for the privatisation of poorly-performing SOEs, arguing that privatising SOEs will introduce competition in key industries.

When you compare private enterprises to their government-run equivalents, Maimane’s ideas seem to hold plenty of weight.

Airlines

SAA, because of their ties to the government, has very little competition, with the exception being Comair though its brand Kulula.com, and their operations of British Airways’ domestic flights.

Here’s how the two compare:

Telecommunications

Broadband Infraco is an SEO in the telecommunications sector that provides long distance network infrastructure.

The latest available report on the national government’s website is for the 2016/17 period. In this time, Broadband Infraco suffered a loss of R125 million.

In contrast, South Africa’s private telecommunications giants achieved much better results.

Both of SA’s dominant mobile networks, Vodacom and MTN, boasted sizeable profits:

Broadcasting

The SABC, South Africa’s state-owned broadcaster, is a disaster.

For the 2017/18 financial year, the SABC suffered a loss of R622 million – citing advertiser cut-backs, a decline in audience numbers, and tough economic conditions.

In contrast, MultiChoice and their flagship products DStv and Showmax are doing exceptionally well.

While state-owned enterprises run smoothly in many countries, looting and corruption have left our SOEs in a bleak state.

Whether or not Mboweni decides to privatise remains to be seen. What is certain, though, is that the country can’t bail out our SOEs for much longer without completely destroying the economy.

[source:mybroadband&businessday]