Cape Town – The biggest concerns of ratings agencies are South Africa’s state-owned entities (SOEs), the ability to grow the economy and when the country is going to resolve policy uncertainty, said Finance Minister Malusi Gigaba on Tuesday.
Speaking to journalists after his budget vote speech in Parliament, Gigaba said ratings agencies are especially concerned about the fiscal risk SOEs pose to government’s ability to toe the fiscal line.
“And if we breach our fiscal framework, it will have a massive impact on the budget,” Gigaba said.
People who occupy executive positions at SOEs are highly paid, he added. “We can’t pay (such high) salaries for people who think they can run them (SOEs) down (with) impunity. We need to be punitive to those who do shoddy work.”
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SOEs, Gigaba said, need to exercise the same fiscal prudence as government departments are currently doing.
"If some of the SOEs were to be removed from the front pages and media headlines, South Africa will be in a much better position to fulfil its fiscal responsibilities," he said.
‘SAA can be fixed’
Asked about the recapitalisation initiative at South African Airways (SAA), Gigaba said he and the team at National Treasury are studying the reports from Seabury and other consulting companies tasked with re-evaluating SAA’s long-term turnaround strategy, including its recapitalisation needs.
“But I want to reiterate that I believe SAA can be fixed,” the finance minister said.
The SAA board, he believes, should be strengthened by appointing an aviation expert who will make sure the board is well balanced with technical skills. “But I have confidence in the board collectively to implement the recommendations.”
Responding to a question about a possible merger and a minority equity partner, Gigaba said both options are still on the cards.
Bain and Company, a Boston-based consultancy firm, was appointed last year to manage the merger of SAA, Mango and SA Express.
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“We believe it (a merger) makes sense,” Gigaba said. “It’s been a long time coming since the first long-term turnaround strategy was introduced.”
He didn’t want to make a pronouncement on the question of a possible minority equity partner, though. “Until we’ve studied the reports and assessed it extensively, it remains on the cards. Hopefully we can finalise it soon. We as National Treasury can’t delay the process,” Gigaba said.
Fin24 earlier quoted Gigaba as saying that a minority partner for SAA could also be a public entity and not necessarily a private partner.
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The Democratic Alliance’s David Maynier and Alf Lees recently raised concerns that such a minority equity partner could very well be the Public Investment Corporation, which manages pension funds on behalf of retired government employees.
National Treasury at the time neither confirmed nor denied the possibility of the PIC as a public equity partner.
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