State entities record profit of R5.4bn

Wednesday, March 8, 2017

Pretoria – The Department of Public Enterprises’ state owned entities have thus far recorded a profit of R5.4 billion for the 2015/16 financial year.

“The analysis of the performance of SOCs clearly shows that these companies are contributing positively to the South African economy and they are advancing the developmental obligations of the State,” Public Enterprises Minister Lynne Brown said.

Briefing the portfolio committee on Wednesday, she said the State Owned Companies (SOCs) are creating direct employment of about 120 000 people.

“All of the SOCs within my portfolio have continued to operate and meet the mandates that they were established for. Eskom is keeping the lights on, Transnet is moving freight that is important for the South African economy,” Minister Brown said.

She said the SOCs in her portfolio have been able to maintain positive external audit outcomes - with the exception of SA Express (SAX).

SA Express is faced with profitability and liquidity challenges. The company has delayed in raising loans since March 2015. The SOC is unable to fulfil its debt payment obligations. Many of SAX’s aircraft are on the ground, due to maintenance issues.

“Improving Governance is at the core of the SOC reform and will remain an important part of SOCs’ performance assessment.

“The department continues to strive to minimize vacancy rate at the board as well as executive levels,” Minister Brown said.

The department has also developed a logical planning, monitoring and evaluation framework that outlines the key steps in the exercise of the oversight mandate. 

“Our SOCs are financially viable and have not defaulted on any loans guaranteed by the Government of South Africa.

“They continue to raise funding in both domestic and international markets at very favourable and competitive rates,” Minister Brown said.

Eskom

She said Eskom has continued to maintain a positive financial performance with the company posting a net profit of R4.6 billion in the 2015/16 financial year.

The company is projected to post a profit for the financial year ending in March 2017.

“Eskom has also implemented a number of interventions to eliminate the electricity challenge experienced towards the end of 2014.

“The company has added over 2 000MW of new generating capacity. This has also been accompanied by an aggressive maintenance plan,” Minister Brown said.

The interventions implemented by Eskom have significantly improved the energy availability factor and allowed Eskom to implement merit order within units which is important for managing costs, she said.

Transnet

Over the next 10 years, Transnet has committed to spend over R200 billion in infrastructure.

“This must be applauded as most companies are substantially cutting off their capital budgets. This commitment shows the significance of maintaining State ownership in these companies and their sustainability must be protected,” said Minister Brown.

She said Transnet is an important company to support the re-industrialisation of the South African economy through improving the performance of strategic corridors.

“Since 2007, Transnet has implemented an expansion programme that responds to South Africa’s industrialization requirements. The company has also started processes to explore new revenue stream to improve the long term sustainability of the company,” Minister Brown said.

She said there are a number of policy decisions that threatens the company’s future sustainability and must be urgently addressed.

“Transnet is faced with the major policy challenge as the National Ports Act requires Corporatisation of Transnet National Ports Authority (TNPA).

“This poses a serious risk to the strength of Transnet Group’s balance sheet; and if implemented, it could jeopardize the implementation the SOC’s investment programme as outlined in the Market Demand Strategy,” the Minister said.

She further added that the Comprehensive Maritime Transport Policy was also not specifically addressing this provision, as it remains subject to the amendment of the National Ports Act.

She said the collapse of demand for commodities and the subsequent decline in export volumes has had a major impact on the sustainability of the company.

“The funding model explored by the company during the commodity super cycle is no longer feasible as most of its clients cannot commit to long term off-take agreements.

“Diversification through expanding networks beyond the national borders and pursuing adjacent market such as manufacturing of locos is important for the sustainability of the company,” she said. – SAnews.gov.za

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