No ‘p-word’ yet for bust parastatals

Struggling national carrier SAA faces a merger with SA Express (SAX) and Gordhan gave a strong hint the state might to find a private investor to salvage the airline. He said yesterday the country had “too many” state-owned enterprises and was looking at small and medium entities in particular to merge them or shut them down.

With total state guarantees for all SOEs at R467-billion, with a negative return on equity, some are a major strain on the public purse. But Gordhan hopes that over time “the word bailout will be erased from our vocabulary”.

And while he said not to use the word “privatisation” in connection with SAA, he made it clear that the state was mulling a “minority equity partnership” for the ailing airline during a pre-budget speech press conference yesterday.

SAA, which has not yet tabled its 2014-15 report, will report a loss as a result of “high operating costs, increased competition on all routes, asset impairments and higher finance costs”.

Gordhan said one of the first steps to righting the airline was putting a permanent board in place, for which a new list of board members had been compiled and would be sent to cabinet within a few weeks for approval.

In his speech he said: “Minister (Lynne) Brown and I have agreed to explore the possible merger of SAA and SA Express under a strengthened board, with a view to engaging with a potential minority partner, and to create a bigger, more operationally efficient airline.”

SAX told parliament’s public enterprises committee last week that they had managed to turn a small profit, but this was not nearly enough for a planned fleet renewal programme.

The airline said it had drawn up some funding plans to submit to government.

Eskom meanwhile has received R14-billion of the R23-billion government appropriation approved last year.

The budget review states that an additional requested R5-billion had been delayed until certain conditions around implementing cost reductions and improving maintenance had been met.

But Gordhan said yesterday that R3-billion of this amount had been approved, with the remainder expected to be approved by March.

The South African Post Office meanwhile recorded a net loss of R1.5-billion in 2014-15 due to declining revenue, loss of key customers during massive strikes and poor performance of its courier business.

The Central Energy Fund was primarily responsible for the decline in return on equity (which was at -2.9%).

The entity reported massive losses of R14.3-billion on top of the previous year’s R1.5-billion loss.

But the budget review states that despite the significant losses “the CEF has significant reserves and remains solvent and liquid”, and that it will be “repositioned” to contribute to energy security.