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Cape Town - The National Treasury has made it clear that it will not in future be an easy task to provide bailouts for failing state-owned organisations and there is likely to be an announcement on the sale of “non-core” assets in time for the February budget.
Addressing a media conference on Wednesday ahead of the presentation of the mini budget (Medium Term Budget Policy Statement) in the national assembly, Finance Minister Nhlanhla Nene said: “We are not going to give you the whole list now.”
While he declined to use the word privatisation, he did say that “we should not shy away from disposing of those (non-core) assets”.
Pressed on whether this represented a sea-change in government policies – which for the last decade had talked up a greater state role in the economy rather than a selloff – Nene was adamant that it was not a change in policy position.
He referred to a significant state involvement in the energy field already through independent power producers and private sector involvement in the solar energy supply.
When he was pressed on whether there would be an announcement on a private equity stake in the troubled South African Airways (SAA), he said government, through treasury and the department of public enterprises and other relevant departments, was working on a plan considering all non-core assets and their disposal.
He did not specifically respond to the SAA equity partner question.
Nene, however, was clear that the state did not want to continue to bail out failing enterprises.
This was backed up by the mini budget, which reported government proposed to lower previously announced spending ceilings for 2015/2016 and the following year. This would include reducing the rate of growth of transfers to public entities, “particularly those with cash reserves”.
Nuclear programme
There were no budget plans on the Treasury table for the proposed nuclear build programme - of six mini nuclear power stations - at this stage, Nene said, indicating that these plans were likely to be finalised at a later date.
The mini budget said state owned companies and public entities played an important role in realising government's economic and social mandate.
"They need to be financially sound and operationally effective, contributing to development without draining the fiscus," it said.
It continued that government was proposing "a new framework" for funding state owned companies that would distinguish purely commercial activities from the costs of exercising their developmental mandates.
"It will include closer monitoring to ensure efficient delivery on government priorities, while simultaneously promoting improved commercial performance. Government has also introduced more stringent financial reporting requirements for public entities."
Significantly, the mini budget also said, given fiscal constraints over the next two years, capitalisation will only be funded by the sale of non-strategic state assets "and will not be drawn from tax revenue or added to the debt of national government".
Government believed state owned enterprises - like Eskom, Transnet and South African Airways - "should operate on the strength of their balance sheets".
- Fin24
* Visit Fin24's Mini Budget Special for all the news.
