South Africans kiss R520 billion goodbye

Finance Minister Enoch Godongwana said the government spent R520 billion to bail out state-owned enterprises, and the money was taken from important sectors.

Godongwana made these comments during a speech at the launch of a new World Bank report titled “Driving Inclusive Growth in South Africa”.

The report states that implementing a series of policy actions can achieve a robust economic recovery in South Africa in the immediate future.

It advised policy actions in infrastructure services, greater private sector participation, creating cities as engines of growth, and efficient public spending.

“This recovery has the potential to create the millions of jobs that South Africans need to improve their lives, exit poverty, and contribute to the economy,” it said.

The new World Bank report states South Africa has a unique opportunity to revitalise its economy.

“The country’s policymakers recognise that improving the economy is essential for winning public trust,” it said.

The World Bank’s new study provides in-depth analysis and practical recommendations to assist South African policymakers.

It includes addressing obstacles to inclusive growth and, most importantly, taking action to pave the way for a brighter future for all citizens.

“The report provides a clear roadmap for South Africa to unlock its economic potential,” said Satu Kahkonen, the World Bank’s country director for South Africa.

Godongwana added that South Africa has clear evidence of the tangible outcomes of reforms that reduce economic bottlenecks.

The Finance Minister said the best example is the first phase of the successful Operation Vulindlela.

A key intervention was reforms to regulation that deepened competition in sectors like electricity, rail, and telecommunications.

“The next phase will go even further and aim to accelerate reforms in key network industries,” Godongwana said.

“We are delighted to have the benefit of this new report to broaden our approach to inclusive growth.”

Wasting money on bailing out state-owned enterprises

During his speech, Godongwana said that over the last fifteen years, the government spent R520 billion to bail out struggling state-owned enterprises and institutions.

This funding was made available without significantly raising taxes, which means the money was taken from other areas.

He said the money to bail out state-owned enterprises was raised by cutting expenditures in other areas, which hurt the country.

Most state-owned enterprises that received bailouts are in a worse state than ever before, showing that the bailouts did not produce positive results.

These include Denel, the South African Post Office, South African Airways, Transnet, and the South African Broadcasting Corporation.

As a result, Godongwana vowed to keep showing tough love toward towards these companies, rebuffing calls for a bailout of Transnet.

“My stance on tough love for state-owned enterprises remains,” he told Bloomberg in an interview on 29 January 2025.

He said political parties can suggest how the government and the National Treasury must attend to Transnet’s challenges.

“How we attend to those challenges is a matter of detail, which, if we do, I cannot talk about at the moment,” he said.

He gave a glimpse into his stance on bailouts in his now-defunct 2025 Budget Speech, which he did not deliver.

He significantly cut Eskom’s debt relief. “The final R70 billion debt takeover will be replaced with R40 billion in 2025/26 and R10 billion in 2028/29,” the speech said.

He added that should Transnet require gap funding for its projects, the Budget Facility for Infrastructure (BFI) will only consider these after proper packaging and financial structuring.

There was no mention of bailouts of the South African Post Office, Denel, or the South African Broadcasting Corporation.

These institutions have begged for money to stay afloat. However, the Finance Minister’s tough love is showing in his budget speech.

The government blew R331 billion on SOE bailouts in ten years

Between 2014 and 2023, the South African government has spent R331 billion on bailouts for state-owned enterprises.

This data was revealed in a presentation to the Standing Committee on Public Accounts on state-owned company (SOC) bailouts and government guarantees in May 2023.

The presentation revealed that the government had spent R331 billion in bailouts of Eskom, SAA, Sanral, Sasria, the Land Bank, the SAPO, and Denel.

These bailouts, called recapitalisations, were granted to implement turnaround plans, repay debt and government guarantees, improve liquidity, and for capital expenditure.

The bailouts increased from R2.9 billion in 2014 to R65 billion in 2023, illustrating the deteriorating state of these organisations.

The table below shows state-owned company bailouts between 2013 and 2023.