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South African State Companies Drain Billions with Negligible Returns | Rateweb
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South African State Companies Drain Billions with Negligible Returns

In a stark revelation, it has come to light that South African State-Owned Enterprises (SOEs) have absorbed a staggering R282.5 billion in government investments since 2019, yet have given back a measly R1 million in dividends. This revelation was made by Pravin Gordhan, the Minister of Public Enterprises, in response to queries posed by MP Farhat Essack during a parliamentary session.

Minister Gordhan emphasized the adverse impact of state capture on all SOEs, asserting that the current administration has refrained from bailouts, opting instead for capital investments to facilitate their journey towards sustainability.

The breakdown of these investments reveals that four major entities—South African Airways (SAA), Eskom, Transnet, and Denel—have received substantial funds from state coffers, yet none have disbursed dividends in return. The sole exception was the South African Forestry Company SOC Limited, which distributed a paltry dividend of R1 million over five years.

The glaring disparity between investment and return is most evident in the case of Eskom, which received the lion’s share of government funds, amounting to a staggering R234.6 billion since 2019. Despite this influx of capital, Eskom has failed to declare any dividends, grappling with financial sustainability exacerbated by outstanding municipal debt, which stood at a formidable R74.5 billion as of February 2024.

Similarly, South African Airways, despite receiving R33.136 billion in investments, has yet to contribute to the state’s coffers in the form of dividends. SAA’s tumultuous journey, marked by bankruptcy proceedings and failed privatization attempts, underscores the magnitude of challenges facing state-owned enterprises in the country.

Transnet and Denel also received substantial sums from the government, approximately R15 billion combined, yet failed to yield any dividends. Denel’s journey, in particular, has been tumultuous, with successive years of substantial capital injections failing to translate into financial returns.

While some argue that these investments are intended to ensure SOEs fulfill their mandates rather than generate profits, the crises plaguing critical sectors such as power, logistics, and defense indicate a deeper systemic issue within these entities.

Despite the absence of dividends, the government continues to funnel billions into these entities, raising questions about the efficacy of such investments and their impact on the country’s fiscal health. The recent R47 billion guarantee facility for Transnet, albeit necessary for immediate liquidity concerns, further underscores the precarious financial position of these enterprises.

Pravin Gordhan’s assertion that these investments are not bailouts but strategic injections to foster sustainability rings hollow in the face of negligible returns. With no dividends to show for billions in investments, it becomes imperative to reassess the approach towards SOEs and ensure accountability and transparency in their operations.

As South Africa grapples with economic challenges exacerbated by the COVID-19 pandemic, the hemorrhaging of public funds into underperforming state entities becomes an issue of national significance. The onus lies on the government to institute robust mechanisms for oversight and governance to prevent further financial hemorrhaging and ensure the responsible allocation of taxpayer funds.

In conclusion, the revelation of negligible returns on investments in state-owned enterprises underscores the urgent need for a paradigm shift in the management and oversight of these entities. With billions at stake and minimal returns to show for it, the time for decisive action is now.