In The News South Africa

Gigaba concerned at SOCs governance and balance sheet problems

PRETORIA, August 26 – Finance Minister Malusi Gigaba has expressed concern at the governance and balance sheet problems of various state owned companies (SOCs), the National Treasury said.

In a statement issued after a meeting on Friday between Gigaba and his executive team and the CEO initiative steering committee members, the National Treasury said Gigaba told the business leaders that measures were being taken to address the financial problems at South African Airways (SAA).

“The good thing is that there is a new CEO who has been appointed. We are paying close attention to strengthening the board of SAA and appointing the requisite skills on the board. Government is exploring options with regards to the establishment of a proper capital structure for SAA,” Gigaba said.

National Treasury had put together several proposals which had now been given to cabinet for consideration and a decision. Gigaba said proposals put forward to cabinet with regards to SAA had not yet been finalised and cautioned against “any hysteria created by our considering of various options. At the present moment what is a fact is that there is a R10 billion recapitalisation that is required for South African Airways but the model of that recapitalisation is not yet finalised”.

During the meeting, Gigaba also raised concern over “the governance and balance sheet challenges” of various SOCs. It was important for government to continue paying attention to governance at SOCs in order for them to become financially sustainable and ignite confidence among investors.

“If you look at the government guarantee framework of Eskom and the level of exposure of government, in particular at Eskom, if there were to be any difficulties, the financial risks to government would be quite enormous because ultimately the government guarantees are borne by government and so government must pay very close attention to the ability of state-owned companies to comply with the guarantee conditions and ensure that they become financially viable.”

Proposals that government was going to look at in coming years with regards to the management of government guarantees included making a provision that guarantees supported capital expansion rather than be provided for operational expenditure.

On Denel, Gigaba welcomed the SOC’s decision to exit the Denel Asia joint venture, the statement said.

– African News Agency (ANA)

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