Since the turn of the century, the South African government has extended R187 billion1 in cash bailouts to state-owned enterprises (SOEs) and currently stands as guarantor behind c.R800 billion2 of obligations. The return on investment on these eye-watering sums has been negligible, mostly due to the corruption detailed in this year’s Zondo report.
These bailouts are increasingly politically toxic, not least because they now come at a time when the government can scarcely afford them. Sluggish economic growth, record high unemployment, under-performing municipalities, once-off expenditures (e.g. recapitalisation of SASRIA) and a shrinking tax base are all, rightly, priority areas for the current administration - which is why we expect Mr Godongwana to double down on his commitment not to provide further bailouts to SOEs. But what is the consequence of walking away from historically cash hungry SOEs?
1 Mr Tito Mboweni response to parliamentary question from the DA, dated 26 August 2020
2 Medium Term Budget Policy Statement 2021