SAA, Eskom and other failing state-firms’ budgeted funding revealed

The Department of Public Enterprises has outlined the financial support that will be extended to the country’s struggling state-owned companies (SOCs) this year.

Presenting the department’s parliament on Wednesday (20 May), acting director-general Kgathatso Tlhakudi said that R37.5 billion has been set aside for state-owned companies – the bulk of which will be given to energy supplier, Eskom.

It should be noted that this is not additional funding for SOCs, but rather forms part of the department’s main budget allocation.

The allocations to state-owned companies are as follows:

  • R33 billion for Eskom in 2020/21 for purchase of equity;
  • R9.9 billion over the medium term for SAA for purchase of equity (R3.8 billion in 2020/21, R4.3 billion in 2021/22 and R1.8 billion in 2020/22) ;
  • R576 million for Denel in 2020/21 for purchase of equity;
  • R164 million for SA Express in 2020/21 for purchase of equity.

Deputy minister of the Department of Public Enterprises, Phumulo Masualle, told the committee that the state-owned firms experienced difficulties before the outbreak of the Covid-19 pandemic, which has made things significantly more challenging.

He said Eskom is unable to raise revenue, and both the South African Airways (SAA) and the South African Express (SAX) are not flying as a result of the Covid-19 pandemic.

“Six months before the outbreak of the pandemic it was tough, the outbreak has made it even tougher, therefore the budget needs to be looked at in this context,” said Masualle.

In response, the parliamentary committee expressed concern over the performance of the SOCs, and how this has affected workers who are currently facing retrenchments and not getting salaries.

They told the department that this is unacceptable and that it should have an effective post-Covid-19 recovery plan in place.

The committee also raised concern around the appointed business rescue practitioners for SAA and SA Express, noting that they have not provided solutions for the challenges that faced the two airlines.

The department has assured the committees that no buyer has been approached for the sale of the entities, and no decision has been taken to sell the entities.


SAA

South African Airways (SAA), presented its draft financial results for 2018 and 2019 to the Standing Committee on Public Accounts (SCOPA) on 15 May, showing R16 billion in losses over the last three years.

The airline recorded a loss (after tax) of R5.4 billion in 2017, R5.5 billion and R5.1 billion in 2018 and 2019, respectively.

This marks the first time the airline has presented its financials since 2017, and the first time the public has gained any insight into its financial situation since the group entered into business rescue in December 2019.

The airline has not turned a profit since 2011, and has received R57 billion in bailouts since 1994. The group meanwhile, secured R3.5 billion in ‘funding’ from the state-owned Development Bank in February 2020.

While most categories of operating costs have decreased over the last three years, SAA’s financials show jumps in data costs, fuel costs and employee costs. This, at a time that airline has been trying to cut flights and retrench staff in a bid to save money.

According to SAA’s business rescue practitioners, without further funding from the government, there are only two options left for the airline: wind up or liquidate. However, this has brought the administrators into direct conflict with the Department of Public Enterprises (DPE), who has said that liquidation is not an option.


Eskom 

Eskom continues to be a major liability for the government, with the company receiving R82 billion in official funding over the last two years.

While the power utility is now facing reduced revenue due to the coronavirus pandemic, the lockdown has given it much needed time to carry out much-needed maintenance across its network.

Eskom chief executive officer Andre de Ruyter indicated that the country may only experience sporadic stage 1 load shedding in the coming months.

“After lockdown we will see the initial 31 days of stage 1 load shedding that we had anticipated for the next quarter being reduced to only three days.

“This is based on partial load losses being reduced by 2,000MW. We are taking advantage of the very unfortunate circumstances that are associated with this global pandemic,” he said.


SA Express

While government indicated that there was still a commercial case for SA Express in February, reports indicate that the company is teetering on the edge of closure.

The regional airline was placed in provisional liquidation on 29 April 2020 after its joint business rescue practitioners filed an urgent court application.

This followed after a failed business rescue attempt, brought by a service provider in March.

Fin24 reports that the contracts of employees of SA Express have now been suspended in terms of the Insolvency Act, and that a number have been told not to report to work,


Read: Here’s how many South Africans are taking pay cuts during lockdown

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SAA, Eskom and other failing state-firms’ budgeted funding revealed