Eskom and SAA on road to recovery, says deputy president

Despite these debt-ridden SOEs potentially crippling the economy, David Mabuza is confident of turning both around

Deputy president David Mabuza says the government remains confident that Eskom and SAA can be returned to profitability despite the current challenges the two state-owned entities (SOEs) face.

During a Q&A session in the National Council of Provinces on Tuesday, Mabuza reiterated that the government has no intention of disposing of SAA, despite growing calls for the state to sell the debt-laden airline.

The crises at Eskom and SAA have put the government under pressure to show its intent on the restructuring of SOEs and reducing the financial burden on the fiscus.

In his budget speech last week, finance minister Tito Mboweni allocated R16.4bn to SAA specifically for the repayment of debt and interest. Eskom was allocated close to R44bn, which will also go towards debt costs. This was in addition to the R49bn the embattled power utility recently received.

While the government has resorted to putting SAA into business rescue, it faces potentially bigger problems at Eskom, the power utility that economists have identified as the biggest single threat to the economy. This is mainly due to its staggering debt of nearly R500bn.

The power utility could also cripple the economy through load-shedding and power outages. Ratings agencies have cited SOEs, including Eskom and SAA, which carry debts of close to R700bn between them, among the major risks to the sustainability of the nation’s finances.

Mboweni has previously suggested that SAA should either be sold or closed down as it does not have a future in its current form. “We are not looking at privatising SAA. We still think we can deal with the challenges faced by the airline,” Mabuza said on Tuesday.

The national carrier recently stopped flying to several domestic and international destinations in a bid to cut costs. It has amassed just more than R18bn in losses since the 2015 financial year and is seeking about R22bn in government bailouts over the next three years.

Mabuza said the cancellation of the routes is temporary.

“This too will pass, and SAA will be stronger. We will not give up routes … the business is about routes. Any cancellation of routes is temporary,” the deputy president said, adding that selling off SAA is not on the table.

“That is why we have [put in place] business rescue practitioners. That means the business is facing problems and must be rescued. We cannot abandon the business,” Mabuza said. “South Africans want this business; we do not think we have reached that point [of wanting to sell]. SAA belongs to the people of SA.”

Mabuza also said the government remains confident that Eskom can be turned around under its new leadership.

“The biggest challenge is the Eskom debt. This is being discussed at the National Economic Development and Labour Council (Nedlac) … the workers in our country are amenable to rescuing our public enterprises. If we deal with the debt issue then we are out of the woods. But I am worried about the culture of non-payment. People must pay for services.

Article by Business Day