Government will not allow struggling but ‘strategic’ state entities to fail – Ramaphosa

JOHANNESBURG – The resolve the government showed in putting troubled national carrier South African Airways into business rescue last week cuts across all key state-owned enterprises (SOEs), which it will not allow to collapse, President Cyril Ramaphosa said on Monday.

In a weekly newsletter, Ramaphosa however said while there had been no other viable and financially workable option for a credible future for the airline, business rescue was not the preferred option for fixing state entities, nor would it necessarily be advisable in other circumstances.

SAA said on Friday it was officially under business rescue, a day after announcing that its board of directors had made the decision after consultations with the government as shareholder, in an effort to find a solution to its financial problems. 

SAA is just one of several state enterprises in financial dire straits, including power utility Eskom, arms maker Denel and passenger rail firm PRASA.

Ramaphosa the problems with the construction of Eskom’s Medupi and Kusile stations accounted for much of the financial crisis at the company, which has been forced to implement rolling blackouts several times this year as its creaking infrastructure suffers breakdowns.

"There have been other factors, of course, not least of which are the effects of state capture, corruption, loss and shortage of essential skills and mismanagement," the president conceded.

He said despite the severe financial difficulties and operational problems faced by state firms, including heavy debt, they had "great assets, a large and diverse cohort of skilled people and solid track records".

"These companies have the potential to contribute to the growth of our economy and the creation of jobs," Ramaphosa said.

"We will not allow any of these strategic entities to fail. Rather, we need to take all necessary steps – even drastic ones – to restore them to health."

"The resolve we have shown in putting SAA into business rescue cuts across all key SOEs. Whether it is (logistics company) Transnet or Eskom, Denel or PRASA, we are taking all necessary measures to turn them around," he added.

He said some of the problems at SOEs had been caused by outdated business models, and this was the reason, for example, that Eskom was in the process of establishing three separate entities for generation, transmission and distribution.

"This will not only help Eskom overcome some of its financial and operational challenges, but it will contribute to a more efficient, cost-effective and sustainable energy sector," said Ramaphosa.

A vital part of the turnaround effort was to reduce the dependence of state firms on bailouts and guarantees from the government.

"For too long, the South African taxpayer has been funding inefficiency and mismanagement in SOEs. This is coming to an end," the president added.

– African News Agency (ANA) 

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