By Luke Daniel for The South African
Embattled state owned enterprises (SOEs) are South Africa’s biggest and most dangerous economic stumbling blocks.
This is according to the international rating agency, Moody’s, which points to Eskom’s major failings as a cause for national concern.
State owned enterprises all performing dismally
While speaking at the Investor Service’s conference on Thursday, the agency’s senior credit officer for infrastructure finance, Helen Francis, outlined the dire position most SOEs find themselves in.
The massive financial drain perpetuated by failing SOEs has been well documented. Eskom, in particular, has reported over R19bn in irregular expenditure and continues to rely on government bailouts to stay afloat.
Worrying, Eskom is undoubtedly the largest and most vital SOE – supplying 90% of South Africa with electricity.
Yet, the embattled national power supplier just can’t seem to get back on its feet, following Gupta interference involving former company boss, Brian Molefe. Recently, the company issued an ominous statement, bemoaning the fact that its coal reserves were dwindling as a result of dodgy tenders.
Looking across the entire SOE spectrum paints a dismal picture. It’s not just Eskom that is dying, and in that way draining the already unsteady economy of vital funds. Transnet, South African Airways (SAA), the South African Broadcasting Corporation, and many more national companies are failing to make ends meet.
Corruption still plaguing SOEs
Speaking to Fin24, Futuregrowth Asset Management’s, Olga Constantatos, said that turning the situation around would not be easy and that much more needs to be done.
Constantatos commented on the disease of corruption and gross mismanagement which afflicts both Eskom and Transnet, saying:
“Much more needs to happen. The latest results at Transnet and Eskom point to the circumventing of controls – with Eskom’s R20 billion in irregular expenditure and Transnet’s R8bn. We need to see prosecutions. We need to see arrests of people who were stealing money essentially from you and me.”
Constantatos added that there needs to be stiffer repercussion for SOEs which flout due process, and as such, essentially, steal from the taxpayer and investors, saying:
“As bond investors, we are custodians of the nation’s pension funds. We should not be allocating capital to institutions where there is malfeasance, or lend blindly to companies that are not responsible.”