MTBPS2022: R30bn windfall allocated to Denel, Sanral and Transnet
South Africa’s troubled state-owned enterprises (SOEs) have scored a combined R30 billion windfall from the portion of the country’s higher revenues so they could reduce their debt and support economic growth.
Revenue collection has exceeded projections across most major tax categories since the 2022 Budget, with the gross tax revenue estimate for 2022/23 revised up by R83.5 billion due to better-than-expected collections in the final quarter of 2021/22.
This comes as the government tries to mitigate economic and fiscal risks associated with these SOEs’ debt exposure and damage to their infrastructure.
Finance Minister Enoch Godongwana said the government had pumped R30bn into three SOEs this financial year to help them pay debt and rebuild their damaged infrastructure.
Tabling his Medium-Term Budget Policy Statement (MTBPS) in Parliament, Godongwana said the government was allocating R30bn to Denel, the South African National Roads Agency Limited (Sanral) and Transnet in the current year.
Godongwana said the proposed conditional in-year allocations to Denel, Sanral and Transnet would reduce their contingent liabilities and enable these entities to continue supporting economic growth and national security.
He said that all three companies were important enablers of economic growth but were facing near-term challenges that required immediate injections of funds.
“We are proposing to use higher-than-anticipated revenues in the current year to reduce risks from specific SOEs,” Godongwana said.
“These resources cannot be used to fund baseline increases as they are once-off. Using them in this way will also not expand the fiscal deficit compared to our existing medium-term plans.
“We are thus tabling a Special Appropriation Bill to provide additional funding to Denel, Transnet and Sanral.
“These allocations will allow these entities to adjust their business models and restore their long-term financial viability.”
Fiscal support to SOEs continues to remain a challenging balancing act given the many competing priorities and limited resources.
Sanral will be receiving the lion’s share of the windfall with a R23.7bn allocation to settle government-guaranteed maturing debt and debt-related obligations.
However, these funds to pay off government-guaranteed debt will be conditional on a solution to Phase 1 of the controversial Gauteng Freeway Improvement Project, commonly known as e-tolls.
A total of R5.8bn will be allocated to Transnet – half of which is shifted funds to repair infrastructure damaged by the recent floods and half to repair and maintain freight rail locomotives.
The state rail and ports operator suffered severe and widespread damage to assets, installations and operations from the heavy rains and flooding in April, resulting in unexpected repair costs and loss of revenue.
Though Transnet generated a net profit of R5bn for 2021/22 financial year, it has suffered from severe infrastructure deterioration, vandalism of railway lines and cable theft, as well as a shortage of locomotives and spare parts.
Denel will be allocated R204.7 million to reduce contingent liabilities arising from its weak financial position and R3.4bn – if set conditions are met – to complete its turnaround plan, making it a viable entity.
The state-owned arms manufacturer remains in financial distress and cannot meet its financial obligations as they fall due.
However, some SOEs such as SAA were left out in the cold as guaranteed debt-related exposure to the airline was eliminated in July with the final tranche of the R16.4bn that was set aside over the 2020 medium-term period to settle government-guaranteed debt and interest costs.
Godongwana said funding to SOEs would now come with strict pre- and post-conditions.
“Pre-conditions mean that SOEs will need to comply with these conditions before they receive government support, not after,” Godongwana said.
“Non-compliance to conditions means no funding.”
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