CAPE TOWN, Feb. 20 (Xinhua) -- Finance Minister Tito Mboweni on Wednesday stressed the urgent need to restructure embattled state-owned enterprises (SOEs) which he said "pose very serious risks to the fiscal framework."
Funding requests from financially challenged SOEs have increased, with several requesting state support just to continue operating, Mboweni said in his 2019 budget speech in Parliament.
These SOEs include the South African Airways (SAA), South African Broadcasting Corporation (SABC), arms manufacturer Denel and electricity utility Eskom, according to the minister.
Mainly due to poor management and corruption, almost all SOEs in the country reportedly are losing money and debt-ridden, with some at the brink of bankruptcy.
"Isn't it about time the country asks the question: do we still need these enterprises? If we do, can we manage them better? If we don't need them, what should we do?" Mboweni asked.
The government, he said, is reviewing its framework for SOEs support after having revised the contingency reserve upwards to 13 billion rand (about 930 million U.S. dollars) for 2019/20 to respond to possible requests by SOEs for financial support.
During this past financial year, the government increased total guarantee utilization by 51.1 billion rand to rescue SOEs, Mboweni disclosed.
In the new fiscal year, the government will tighten the guarantee rules, he said.
If an SOE applies for a government guarantee for operational purposes, it will be required to appoint a Chief Reorganization Officer (CRO) in concurrence with the National Treasury and its bondholders, Mboweni explained.
The CRO will undertake a full operational and financial review, he said.
When banks need state support, the government appoints a curator, and when provincial and municipal finances are in disarray, the government can take over the running of the administration, the minister said.
These rules should also apply to all SOEs, he said, adding that the cabinet is considering a proposal to end the issuing of guarantees for operational purposes.
Expiration dates on guarantees will also be strictly enforced and strategic equity partners will be found where possible, according to Mboweni.
"We are taking tough steps to fix the fiscal position and state-owned enterprises," he concluded.
