President Cyril Ramaphosa and newly-elected public enterprises minister Pravin Gordhan appear to have their work cut out for them, as government departments and state-owned entities continue to break rules to get around budget restrictions.<\/p>\n
According to a report by the City Press<\/a><\/strong>, in the past three months Treasury was forced to block state-owned entities and government departments from blowing R15 billion on irregular purchases.<\/p>\n These include requests from\u00a0state companies SAA, Armscor, the South African Post office, the SABC, Eskom, and the\u00a0environmental affairs department, the report said.<\/p>\n Senior Treasury officials told City Press that all they could do was refuse, but it did not mean the state companies and departments abided by their decision.<\/p>\n They added that in many cases, officials in state-owned enterprises (SOEs) and departments demand kickbacks from companies after securing Treasury permission to extend or award contracts without having to go out to tender first – often running into the millions of rands.<\/p>\n This corruption also affects service delivery, the sources said, as government departments and companies will deliberately wait until it is too late to advertise a tender after which they will ask for the current contract to be extended.<\/p>\n Risk<\/strong><\/p>\n Following the tabling of the budget in February,\u00a0credit ratings agency Fitch warned that, despite positive measure being implemented,\u00a0it\u00a0remains to be seen how fiscal policy will evolve under president Ramaphosa.<\/p>\n \u201cThe largest risk stems from state-owned enterprises \u2013 notably the electricity company Eskom, whose medium-term finances are under pressure from weak demand growth and the electricity regulator\u2019s refusal to grant more substantial tariff increases,\u201d Fitch said.<\/p>\n \u201cThe government does not foresee further capital injections for Eskom, and pointed to a number of potential measures, including private-sector participation, to improve its finances.<\/p>\n \u201cBut this approach will face significant political hurdles,\u201d it said.<\/p>\n This sentiment was shared by S&P Global, which\u00a0downgraded<\/a> <\/strong>Eskom on Wednesday (28 February),\u00a0amid ongoing liquidity concerns and what it believes to be insufficient government support.<\/p>\n Moody’s, the only ratings agency which has not downgraded South Africa to junk status, is expected to deliver its updated review before the end of March.<\/p>\n
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