Of all the major state companies under the Department of Public Enterprises, only one is not making a loss

Parliament’s Portfolio Committee on Public Enterprises has expressed concern about the performance of South Africa state-owned enterprises (SOEs) as the companies continue to haemorrhage money.

The committee said that it was particularly concerned to hear that all SOEs under the umbrella of the Department of Public Enterprises are loss-making – with the exception of the South African Forestry Companies Limited (Safcol).

Speaking to BusinessTech, Committee chairperson Khaya Magaxa said that there are currently seven major SOEs that fall directly under the Department of Public Enterprises. These include:

  • Alexkor
  • Denel
  • Eskom
  • Safcol
  • South African Airways
  • SA Express
  • Transnet

In in 2019, Eskom said it expects losses to amount to R20 billion for its current year, while SAA has not published financial results over fears of being liquidated if it does.

SAA’s problems extended to SA Express, which saw a financial loss of R590 million in 2019.

Alexkor reported an accumulated loss standing at R174 million in the current financial year, while Denel and Transnet saw losses of R1.9 billion and R12 billion, respectively.

This brings total losses in excess of R34 billion (excluding SAA, which is unknown) in a single year.

The committee said the department’s presentation on SOEs painted a dismal picture with notable deteriorations seen at Transnet and Denel.

Transnet’s overall shareholder compact performance has dwindled from 49% in the first quarter to 41% in the second quarter and 32% in the last quarter of the period under review.

Magaxa said that the regression at Transnet is of particular concern, as the entity was previously considered more successful.

He added that SOEs are rife with governance challenges and financial distress, as a result of corruption.

Wage bill cuts

Key to turning around South Africa’s SOEs is the plan to cut over R160 billion from the country’s public sector wage bill.

Between 2006/07 and 2011/12, the state added over 190,000 employees. However, wages also increased significantly, finance minister Tito Mboweni said during his Budget Speech.

“To balance the books, we slowed hiring, and since 2011/12, the number of government employees has declined,” he said.

“We cannot go on like this. Classroom sizes are growing, hospitals are getting fuller and our communities are becoming increasingly unsafe.”

He said once wage growth, corruption and wasteful expenditure was under control, government would focus its attention on hiring in important areas such as education, police, and health care.

“We can hire strategically and better match skills with opportunities,” he said.

Read: Government will reduce the public sector wage bill by R160 billion

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Of all the major state companies under the Department of Public Enterprises, only one is not making a loss