State-owned entities in South Africa, such as Eskom, the South African Post Office (SAPO), and Transnet, have been facing significant financial difficulties over the past three years.
Despite efforts to rectify the situation through turnaround and business rescue plans, these companies have continued to post substantial losses.
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Eskom, the state-owned power utility, has been particularly affected, reporting losses totalling R54.6 billion over the past three years.
The most significant loss came in the 2022/23 financial year, with a net loss of R23.4 billion. Despite a 9.61% increase in tariffs, Eskom’s financial performance worsened due to factors like generation supply constraints and delays in commissioning new independent power producer capacity.
Transnet, the state-owned port and rail company, has also experienced a rollercoaster ride of losses and profits. In the 2020/21 financial year, Transnet reported a loss of R8.7 billion, followed by a profit of R5 billion in the year that followed.
However, in 2022/23, the company reported a loss of R5.7 billion due to operational issues at its ports. Despite the loss, Transnet’s executives received a combined R87 million in compensation during the financial year.
The South African Post Office has been struggling for several years, but it has shown some improvement since 2019. SAPO managed to reduce its losses from R5.3 billion in 2019/20 to R2.4 billion in 2020/21.
However, its financial situation remained stagnant in 2022/23, with a net loss of R2.2 billion, the same as the previous financial year.
The South African government, with the support of taxpayers, is actively working to improve the financial situation of these state-owned enterprises. Eskom, in particular, has accumulated a substantial amount of debt due to the construction of new power stations and issues of corruption and wasteful spending.
In response, Finance Minister Enoch Godongwana announced a R254-billion debt relief arrangement for Eskom during his 2023 budget speech. This relief plan includes a full debt settlement requirement of R184 billion in three tranches over the medium term, as well as a direct takeover of up to R70 billion of Eskom’s loan portfolio in 2025/26.
However, the bailout does not cover all of Eskom’s debt, and strict conditions are attached to the arrangement. Transnet has also developed a turnaround plan to address its operational challenges.
The plan focuses on goals such as balancing financial stability and operational performance, improving the use and care of operational assets and infrastructure, and reducing costs to improve cash flow. These measures aim to strengthen the operational state of Transnet’s freight rail division and support key sectors of the economy.
SAPO, on the other hand, was declared officially insolvent in July 2023. Joint business rescue practitioners developed a plan to restructure the post office and ensure the provision of essential communication services to all households, including those in rural areas.
The plan includes cutting thousands of jobs to reduce SAPO’s headcount to around 5,000 employees, allowing for more affordable and convenient service delivery.
