Already limping, SOEs brace for impact of coronavirus

Covid-19 will deepen the financial woes of state-owned enterprises, members of Parliament heard on Wednesday.

During a briefing on the department of public enterprises budget and plan for the year, acting Director General Kgathatso Tlhakudi explained that the budget were already under strain, prior to the Covid-19 crisis hitting SA shores. It is now working with Treasury to see where funds can be released to help government's efforts to fight Covid-19. Any spending plans are now subject to change.

The department has oversight over power utility Eskom, state rail and ports company Transnet, state arms manufacturer Denel, as well as airline SAA - under business rescue - and SA Express, which is now placed under provisional liquidation.

Eskom has initially been allocated R33 billion from the department. By comparison, SAA's allocation is just over 10% of that figure, at R3.8 billion.

Worsening situation

Deputy Public Enterprises Minister Phumulo Masualle, who was also in attendance, said that Covid-19 had exacerbated the challenges entities were facing. "The Covid-19 scenario has worsened the situation," he said. The strategy developed by the department, as well as its budget, had been finalised late last year, and did not account for the impact of Covid-19, he explained.

Once Finance Minister Tito Mboweni tables a new budget, the department would be better positioned to present adjustments for Covid-19, members of Parliament heard.

The lockdown, to slow the spread of Covid-19, resulted in a slowdown in economic activity – which had implications for Eskom, Transnet, Denel and SAA.

Eskom was unable to raise revenue. While it has been able to avoid load shedding and implemented maintenance of some plants, Masaulle said the financial position had worsened due to a loss of revenue as a result of businesses closing down and municipalities facing similar difficulties.

"When the economy restarts, we hope to have better energy availability going forward.

"But the financial position has weakened," he said.

'Decimated'

Transnet similarly had to deal with reduced activity at ports, especially with companies producing less. Denel has also been having trouble with its cashflows, given limited trade between countries.

"Going forward, the recovery will depend on how the opening up of the economy will be controlled going forward," Masaulle added.

The prospects are no better for SAA and SA Express, with the airline industry worldwide forced to ground a number of flights due to Covid-19. "Literally around the world, the industry is getting decimated," he said.

While SAA's business rescue practitioners are expected to submit a business rescue plan at the end of May, employees at SA Express have already had their employment contracts suspended without pay as part of the provisional liquidation process.

Masaulle said the matter at SA Express does not "sit well" with the department and they want relief to be provided to the airline's employees through the UIF. "The future of SA Express must be decided very soon, so the situation that the workers fund themselves in be brought to an end," said Masaulle.

Additional reporting by Carin Smith. This story was amended at 18:12 on 20 May 2020 to reflect that the Eskom budget is R33 billion and SAA is R3.8 billion.