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Bailouts cost state billions  Comments

Eskom leads the pack in handouts to keep it running

October 19, 2009

By CARIEN DU PLESSIS


Eskom is almost entirely to blame for an almost tenfold increase in state handouts to state-owned entities last year, which amounted to almost R200 billion.

The electricity utility received R10 billion in loans from the Treasury in 2008/09 and will be borrowing another R50 billion in the following two financial years, Finance Minister Pravin Gordhan told the DA in a written reply to a parliamentary question.

Last year, the power utility received almost R176 billion in guarantees from the government and transfers worth R2.7 billion over the past four years.

Eskom has provoked a public outcry by revealing that it wants to triple the price of electricity with increases of 45 percent a year over the next three years, complaining that it would still be R63 billion short of the money it needs for its expansion programme.

The National Energy Regulator of South Africa recently granted Eskom an average price increase of 31 percent for July to March next year after it asked for 34 percent.

DA finance spokesman Dion George has called on the government to halve the support of just over R199 billion it gave state-owned entities last year and instead use the money to wipe out the country's budget deficit, which is expected to come in at between R60 billion and R80 billion.

Government financial support to state-owned enterprises in the 2007/08 financial year amounted to R16.6 billion.

"The question is not whether financial assistance should be given to these institutions, but how this unnecessary expenditure can be cut back," George said yesterday.

Gordhan said the financial support given to state-owned enterprises in 2005/06 totalled R10.7 billion, and in 2006/07 R15.5 billion.

George has blamed the financial burdens created by many of the state-owned entities (SOEs) on "their poor management and corruption due to the ANC policy of cadre deployment".

He said taxpayers should not be expected to bail these out year after year.

Public Enterprises Minister Barbara Hogan came under fire from the ANC's alliance partners, Cosatu and the SACP, when she suggested earlier this year that non-performing SOEs could not be endlessly bailed out and might have to be sold off.


Topping the list of entities into which the state is pouring taxpayers' rands is the Pebble Bed Modular Reactor project.

Over the past four years the project has received R4.5 billion, followed by Denel, which received R3.5 billion.

SAA received close to R1 billion over this period, but posted a profit recently, muting its critics somewhat.

George said, however, that the more than R1.7 billion in transfers received by the SABC and SAA over the past four years could have drastically changed the plight of homeless people and could have paid for more than 33 000 homes.

He called for the privatisation of state-owned enterprises, but said that in the short-term, an immediate intervention was necessary to cut down their dependence on government funds.

"On the one hand we have a series of ostensibly independent institutions, which receive a budget, have a staff structure and mandate, but in real terms cannot deliver on their mandates, are undermined by staff that do not perform and fail to properly utilise their budgets," he said.

"The expenditure on state-owned enterprises is going to be of crucial importance to fiscal sustainability in the coming years and now that South Africa is facing a budget deficit, everything needs to be done to cut back on wasteful spending," said George.

Cosatu has also called for caution in providing government support to these entities, but the labour federation has said it is not opposed to bail-outs in principle if they were "essential for the economic health of the country".

Cosatu spokesman, Patrick Craven, said yesterday: "There must be strict accounting to prevent the need for bailouts in the first place."

He also said there should be checks against corruption and excessive perks being awarded to their top executives.

"But these enterprises can't be allowed to collapse, because they are important financial services," he said.

The SACP has previously called for cuts in the salaries of SOE executives as well as for more state intervention in streamlining their management so that more money is available for them to carry out their core business.
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Showing page 1 of 3 comment pages, 24 total comments
16 Weeks ago Musikwudd wrote :
ANC- CADRE- DEPLOYMENT COST TAXPAYERS HEAVY - but with the mechanisms of directing the public simple mind, these corruptions will go on until the " barn " is empty Zimbabwe -style ! Flying with the state owned and as mentioned above heavily subsedised carrier SAA is getting worse every time I am using it ! Ignorance and arrogance are on the advance. They leave a track of devastation behind.
16 Weeks ago Anonymous wrote :
dear God please makr it quick and painless for South Africa
16 Weeks ago Anonymous wrote :
Whilst we have an incompetent government in place, we will continue on this downward spiral,jobs for pals and mass corruption. pity the masses that vote these people into government dont realise that they shooting themselves in the foot.
16 Weeks ago The Grim Reaper wrote :
I believe our Government and the Corporates that they patronize so faithfully, are of the foolish opinion that they are here to stay, come what may. They really believe that it would not be possible to remove them from their position of power. But, then, so did Rome and their silly, weak, corrupt, overindulgent, idiotic, god-men officials; - who all eventually were removed. If God be for you, who can be successful against you, is a truthful, proven statement. On the other hand, if God be against you, who, then, can not be successful against you. For this government to enjoy God's favor and support, they will definitely have to do a smart about-turn and start serving this Nation according to the conditions laid down by God. For the past fifteen years, they have done just the opposite; all acting like complete unbelievers and setting a totally disgraceful example to the world. This in itself says that their time is very short, and they better believe it, because God is no respecter of persons. Remember, also, God called you and gave you the opportunity to be in His service by being good and faithful servants to this Nation. His word says nothing about you being in power. This could very well be the last wake-up call to our sleeping Government; this before the dream bubble bursts: when those who voted them into service take the opposite initiative to remove them; even by force. You have been forewarned; receive this and respond with wisdom; not with foolish self-destructive pride. The writing is on the wall !!! Remember, sound-serving Government is only for the common good: not only for the corporate good !!!
16 Weeks ago DrPhil wrote :
Mothac, the best comment read so far !!! Eskom have proved their incompetence....let's open up the power supply game and invite others to participate.... the current Eskom leadeship have since all their increases and loans 1.) Not provided any more capacity 2.) Run a loss of nearly R8Billion !!! 3.) rewarded stupdendous bonuses to their top management 4.) requested more increases !! Let's have competition and competitive pricing of electricity please !! Further to that ... I would love to know what our brothers across the border pay per KWh supplied by Eskom to them...
16 Weeks ago TOKYO3991 wrote :
It's pointless whining. Lip service is all the ANC will pay toward curbing excessive expenditure, whilst our money continues to be wasted away on military aircraft and ministerial perks. The Zuma Administration, ANC and TRI-PARTHEID cronies, are hypocrites. Don't waste your time, it's like farting against thunder. The whole thing stinks.
16 Weeks ago Mothac wrote :
Rather stop all new funding to Eskom and get a second and maybe even a 3rd electricity supplier. Competition will be good for the end user and we will not be held to randsom by a single supplier.
16 Weeks ago Anonymous wrote :
Sniff sniff....does anyone else smell that....yeah it really really stinks
16 Weeks ago julius wrote :
Disgusting! Incompetence and the ANC does nothing. Absolutely nothing.
16 Weeks ago Anonymous wrote :
scrap the Eskom plan to build new power stations until a full and complete audit is done of the necessity for them,and the type of plants to be built. We cannot trust the say-so of Eskom and what worries me is another arms-deal type situtation in the making, ie it now turns out that we didn't need to buy all those billions of rands of expensive arms.
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