Moves to tighten grip on state entities

Monday, February 22, 2010

Pretoria - Government says it's committed to ensuring that the capital investment programme of state-owned entities remains on course while work is underway to strengthen their management and oversight.

President Jacob Zuma has also commissioned a private company to review the operations of all state-owned enterprises (SOEs) and provide solutions to their problems.

Zuma revealed during an interview with the SABC a week ago that he was to order a review of all of the state entities in an attempt to address managerial and operational challenges.

The plan is to ensure that the SOEs remain in a good financial footing and that the challenges currently experienced by some do not hamper their mandate to serve the public.

In February last year, government approved guarantees totaling R176 billion to support construction of new power plants for Eskom. Agreements have been finalised and Eskom has started to utilise its R60 billion subordinated loan from government.

The 2009 Budget also included a capital equity provision of R1.5 billion for South African Airways to replace an existing guarantee of R1.6 billion provided in November when SAA saw the grounding of its fuel inefficient B747-400 aircraft.

Another agreement was approved in September to avert concerns relating to the airline's 2008/09 financial statements. Government is confident that indications show that SAA is returning to financial sustainability.

Government has provided a six-year, R1.4 billion guarantee to Autopax for the purchase of 570 buses for the 2010 FIFA World Cup. The guarantee was based on a business plan outlining plans for both the world cup and options for longer term public transport use. Suppliers for the buses have already been chosen while funding arrangements were being finalised.

State-owned arms manufacturer Denel's two existing guarantees of R880 million and R420 million were extended to 31 march 2011 to avoid an audit qualification for its 2008/09 annual financial statements.

Government provided an additional guarantee of R550 million for working capital and interest payment requirements in August last year. The money was to be released in three phases linked to the achievement of Denel's turnaround strategy, which was closely monitored.

Last year the National Treasury approved a R1.473 billion bank guarantee to the South African Broadcasting Company (SABC) when the public broadcaster found itself in deep financial crisis. The guarantee was to be released in tranches, with a draw-down of R1 billion made available immediately.

It was agreed the remaining R473 million would be released subject to the development of a detailed project plan by the SABC committing itself to explicit revenue targets and cost cutting measures to enable effective oversight and monitoring of projections by government.

Both Communications Minister Siphiwe Nyanda and National Treasury have vowed to closely monitor developments at the SABC. Zuma said he will decide on what steps to be taken once the review had been completed.