There was bad news for South Africans last week, as the GDP hit the lowest it’s been since the global financial crisis a decade ago.

Meanwhile, State Owned Enterprises (SOEs) continue to bleed the Treasury dry at every opportunity, as they struggle to get it together when it comes to expenditure and top management positions.

A recent meeting between SOEs and President Cyril Ramaphosa took place to discuss the current state of play at 10 of the country’s key enterprises, reports Fin24.

Here’s what we know about the current state of South Africa’s five most important state-owned companies.

Eskom

Eskom is currently without a CEO after Phakamani Hadebe resigned because the job was affecting his health.

The power utility has a debt burden of over R420bn. Earlier this year Finance Minister Tito Mboweni announced in the National Budget that Eskom would be granted a R69bn lifeline over the next three years to accompany its unbundling. A reorganisation officer will also be appointed to carry out recommendations of the Presidential Task Team to help turn around the entity.

The damage done by load shedding and general incompetence has contributed to the contraction of the economy.

SABC

SABC axed their CEO Chris Maroleng, who was found guilty on three charges which included gross negligence.

At a briefing to Parliament’s portfolio committee on communications, new CEO Madoda Mxakwe said that the public broadcaster is facing liquidity challenges affecting its status as a going concern.

The broadcaster, which is still reliant on funding from government, said if nothing is done to help the SABC it could be financially insolvent by the end of March. At the same briefing Communications Minister Stella Ndabeni-Abrahams told Parliament that the department is engaging with National Treasury to secure funding for the state broadcaster.

They’re seeking R6,8 billion to see them through. they also want to hire people who will make sure that the money is used effectively.

SAA

SAA CEO Vuyani Jarana recently jumped ship, citing uncertainty about funding and bureaucratic processes delaying decision-making needed to turn around the airline.

To effect the national carrier’s three-year turnaround plan so that it can break-even by 2021, SAA requires R21.7bn.

According to Jarana’s resignation letter, there had been three incidents from 2018 to date in which the entity was almost unable to pay salaries due to a lack of funding. The entity was granted a R5bn cash injection from Treasury late last year, but the majority was used to pay off creditors. A further R3.5bn loan facility from local lenders will be depleted by June 2019, according to Jarana.

SAA did not receive any allocations in the National Budget.

Denel

Denel appointed a permanent CEO, Daniel du Toit, in January 2019, but there was backlash from the Liberated Metalworkers Union of SA, who criticised the decision to appoint a “white male”.

Denel had issued a statement defending the appointment by citing the diversity of the Denel workforce.

The state arms manufacturer made a loss of R1.7bn in 2018. The entity’s revenue dropped from R88.4bn reported in 2016/2017 to just over R8bn in the 2017/2018 financial year. Denel’s chairperson Monhla Hlahla told parliament’s portfolio committee on public enterprises in 2018 that the losses were attributed to “weak contract management”.

There seems to be a lot of weak contract management going around.

Prasa

Prasa also doesn’t have a CEO or CFO at the moment.

Nzimande told Parliament’s portfolio committee on Transport in June 2018 that Prasa had been in bad shape for a long time and said it had been used like an ATM, instead of serving its purpose in providing public transport.

The entity received a qualified audit opinion from the Auditor General for the 2017/2018 financial year. The AG flagged that there are not adequate systems in place to ensure disclosure of all irregular and wasteful expenditure by the entity. He was also not certain if Prasa could continue as a going concern. The group incurred a net loss of R924m.

It’s going to be tough to come back from that one.

Other SOEs struggling in South Africa include…

The South African National Road Agency (Sanral) who have been struggling to collect e-till fees, requiring them to request a R6 billion bailout from Treasury last year.

Transnet currently doesn’t have a permanent CEO or CFO. The company has also appeared before the state capture commission of inquiry due to mismanagement and wrongfully awarded contracts – some of which went to Gupta-linked companies.

PetroSA is facing concerns around its ability to continue operating in the future following continued weak crude prices, as well as increasing debtor’s collection periods “putting strain” on its cash inflows.

SA Express’s financial report for 2017/2018 reflected pointless and wasteful expenditure of R42 million and irregular expenditure amounted to R408 million. They’re hoping to turn things around.

And finally, the Road Accident Fund, whose liability is expected to grow from R206 billion to R393 billion by 2021/22. The RAF may require large increases to the fuel levy in the next three years to manage the short-term liability.

In summary, South Africa’s SOEs are for the most part bleeding money and completely without proper permanent senior management.

So yeah – things are not looking great.

The only thing they seem to be good at is operating as black holes for taxpayer money.

[source:fin24]