Huge bail-outs for state firms

Cape Town - As Minister of Public Enterprises Barbara Hogan and her inter-ministerial team get to work to find ways to improve the performance of parastatals, the national treasury has confirmed that government has bailed state-owned entities out to the tune of R243bn over the last four years.

"This (R243bn) is enough money to build at least four large coal-fired power stations, says DA MP on parliament's select finance committee, Tim Harris.

This total financial assistance, which was detailed by treasury in response to a parliamentary question, includes the R1.4bn guarantee given to the embattled and indebted SABC this week.

Hogan, however, is not willing to say whether the inter-ministerial analysis of SOEs that is now underway includes a review of the legislation governing these groups, which is apparently causing major problems.

Nine of the SOEs are governed by two laws - the Public Finance Management Act (PMFA) and the Companies Act.

According to the Institute of Directors (IoD), the disjuncture between these two laws poses major difficulties for boards, which operate as normal company boards, to oversee the running and management of SOEs like Eskom effectively.

Essentially the problem is that the PMFA allows the shareholder (government) to appoint parastatal CEOs and allows government to be involved in any decisions regarding dismissal.

This provision, according to the IoD, leads to confusion around issues like role clarification and opens the system up for boards to appear undermined by government. This was, of course, apparently the reason why Eskom board chairperson Bobby Godsell resigned over the refusal of CEO Jacob Maroga to step down as requested by the board.

The legal disjuncture also emasculates the board when it comes to holding the executive to account and making sure they are performing and spending money optimally.

Responding to questions by Fin24.com about whether the inter-ministerial review would include the legal difficulties SOE boards faced, Hogan's spokesperson Ayanda Shezi said: "It would be premature to discuss the details of what policies and legislation will be reviewed."

Meanwhile, according to the treasury, government's financial assistance to SOEs since 2005 includes Eskom (R188.67bn), Denel (R8.82bn), Land Bank (R6.7bn), SAA (R5.2bn), Pebble Bed Modular Reactor (R4.46bn), SABC (R2.23bn), SA Post Office (R1.54bn) and Sentech (R953m).

- Fin24.com