MTBPS: South African SOEs face tough love as Treasury withholds funding

The Treasury announced that no funds have been allocated to struggling State-Owned Enterprises, such as Denel and the Post Office. Picture: David Ritchie/ Independent Newspapers

The Treasury announced that no funds have been allocated to struggling State-Owned Enterprises, such as Denel and the Post Office. Picture: David Ritchie/ Independent Newspapers

Published Oct 30, 2024

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The Treasury announced that no funds have been allocated to struggling State-Owned Enterprises (SOEs), such as Denel and the Post Office. Arms manufacturer Denel remains a financial risk for the Treasury, as it is unable to meet its financial obligations.

As noted in previous budget documents, Denel requires broader policy decisions to successfully implement its turnaround plan and achieve sustainability. The global increase in arms spending, due to various conflicts, may offer Denel an opportunity for revenue growth in the future.

In his first Medium Term Budget Policy Statement (MTBPS) in November 2021, Finance Minister Enoch Godongwana introduced a “tough love” approach to SOE bailouts, which was evident again during his media briefing prior to delivering the 2024 MTBPS.

“SOE bailouts have cost the government R520 billion over the past few years. That has meant that this money must come from somewhere, and in most cases, it has come from the reduction in social services. So there is an opportunity cost to SOE bailouts. One must ask what is the immediate future of the Post Office, and is it sustainable in the future,” he said.

Addressing a question about the airline SAA, Godongwana stated that, in the absence of a Strategic Equity Partner deal, SAA has scaled back its expansion plans to reduce its need for upfront capital. He reiterated that SAA would not receive further support from the Treasury.

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