The state companies running on empty in SA

 ·21 Aug 2017

State-owned companies in South Africa have been marked by ratings agencies as one of the biggest risks to the country’s crawling economy.

A failing state company – one that incurs annual losses – is a net drain of the South African economy, requiring government bailouts financed by taxpayers.

The country’s SOEs incurred a combined loss of over R15.5 billion in the 2014/15 financial year – with many continuing to struggle into the current financial year.

It is no secret that entities including South African Airways (SAA), the SABC and the South African Post Office have been losing billions for years – while even reports of profitable companies like Eskom, do not tell the full story.

BusinessTech has looked at the financial performance of nine of the the most prominent SOEs, showing mixed results.

All financial data was taken from the latest available annual reports (2016/2017).


  • Revenue: R41 billion
  • Profit: R3.9 billion

A noted stand-out success is Telkom, which although a state-owned company, is also largely run as a private firm – publicly listed, with a private shareholding.

In the past, Telkom exhibited the key markers of most other SOCs – bloated employee numbers, high levels of government interference, and years of operating losses – but has more recently turned the business around, taking the necessary steps to return cash to shareholders.


  • Revenue: R 65.5 billion
  • Profit: R2.8 billion

Transnet, along with Eskom, is heavily implicated in widespread allegation of state capture, where many contract discrepancies are being highlighted and brought to the fore.

Many of these have to do with money being paid to companies who are not doing much work. At the heart of the allegations is the Gupta family, and Transnet’s massive procurement budget.

Unlike Eskom, however, Transnet’s finances are far healthier, with the group continuing its trend of profitability, posting a R2.8 billion profit for 2017.

Rand Water

  • Revenue: R11 billion
  • Profit: R2.1 billion

Rand Water is a SOE that is expressly ‘not for profit’, with its R2.77 billion profit in 2016 being reinvested in the company’s infrastructure and development projects.

The biggest issues the group faces is in line with other utilities like Eskom, where debts are not being paid off by various municipalities.


  • Revenue: R177 billion
  • Profit: R888 million

Eskom’s recently published results showed a profit of R888 million, despite expectations that the power utility would run into a loss. Like Transnet, Eskom has been embroiled in the state capture saga, with accusations that the company was milked by companies linked to the Gupta family for hefty contracts.

Despite the politicization around Eskom, and the apparent profitability of the company, warning bells are ringing over the group’s increasing debt numbers and its struggle to raise new funding.

The group is currently the largest liability on the state coffers, with over R350 billion in guarantees – an amount analysts expect will only increase in coming years.

Eskom, specifically, has massive levels of debt which, despite its apparent profitability, tell a more troubling story of what difficulties lie ahead.


  • Revenue: R1.2 billion
  • Profit: R327 million

Sentech has been left in limbo as the digital terrestrial migration saga drags on, missing deadlines and cut off dates. The signal distributor has been stuck continuing dual illumination (broadcasting digital and analogue signals simultaneously) while the state and private sector dog it out over set top boxes and DT policy.

In 2016 the group posted a profit of R327 million. There has been speculation that the company will be merged with Broadband Infraco to focus on broadband rollout.

Broadband Infraco

  • Revenue: R452 million
  • Loss: R91 million

Tasked with rolling out high-speed Internet in South Africa, Broadband Infraco is a state company that often falls into obscurity when faced with the rapid developments coming out of the private sector.

The group has also never posted a profit, with the 2016 financial year yielding a R91 million loss. Recent reports say that the government is considering merging the struggling company with Sentech, with Telkom having looked at acquiring the state asset before.

As with the private sector, there are concerns around the duplication of infrastructure and technology – and with so many developments happening in the broadband space, Broadband Infraco is a dangling asset that many are unsure of where to place.


  • Revenue: R8 billion
  • Loss: R412 million

The SABC us currently trying to pick up the pieces following the “Hlaudi Motsoeneng” years, where the controversial former COO orchestrated new policies which saw the public broadcaster lose millions.

In 2016, the group posted a loss of R412 million. New reports indicate that Motsoeneng’s “90% local policy” cost the group R183 million in TV ad revenue and a R29 million loss for radio – and that excludes the R72 million that needed to be paid to replace local content.

Add to this a consistent shortfall in the collection of TV licence fees every year, it becomes clear the new SABC board has a steep challenge to turn the ailing company around.


  • Revenue: R4.7 billion
  • Loss: R1.1 billion

The South African Post Office has been working on its turnaround strategy for a number of years – and the latest reports out of the group paint a better picture than what was seen during mass strike action and inability to pay salaries in 2014/15.

The group posted a R1.14 billion loss in 2016, with hopes for a better financial performance hinging on its plans to become a state bank through Postbank, which will also hopefully secure the country’s social grants platform.

SAPO’s social grants testing is expected to start in November – though doubts linger.


  • Revenue: R30.4 billion
  • Loss: R1.5 billion

South African Airways’ many failings are well-documented – and its 2016 loss of R1.5 billion is just another stepping stone of the airline’s steady decline.

Most recently, SAA was granted a R2.2 billion government bailout from the state’s emergency fund to help prevent it from defaulting. This is just the start of the problems, however, as the airline will need another R6.8 billion to cover debts – a small part of the R19 billion in debt that could be recalled if the airline misses a payment.

The latest reports point to the airline being bankrupt, and unable to pay salaries.

Read: SAA asked the government for R10 billion – Gigaba

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