Taxpayers will have to fork out billions for Covid-19, SOEs tell parliament

State entities, including the SABC, Denel, Airports Company SA (Acsa) and the Post Office,  have requested billions of rand in funding from the taxpayer to help them weather the coronavirus storm, says the National Treasury.

In a presentation to parliament’s standing committee on appropriations, the Treasury said the SABC “has indicated” a revenue loss of R1.5bn for the 2020/21 financial year as a result of the pandemic's affect on revenue and the displacement costs of public service announcements.

“The SABC has confirmed it is requesting R1.5bn in support,” the Treasury said. It said the SABC had said it would prioritise and fast-track revenue-enhancing initiatives which include restructuring its sales teams, the introduction of additional revenue lines, partnerships and a move into digital platforms for the distribution of its content.

The entity’s operations had been significantly hurt by Covid-19, given that it had to provide additional coverage of current events, which lead to the displacement of its content line-up and, as a result, a loss in advertising revenue, the Treasury said.

The SABC also indicated it had collected less in television licence fees than in the previous financial year.

The Treasury told parliament the SABC had reported a preliminary loss of R489m for the year ending March 2020.

“The SABC will have to reduce its staff complement if it wants to be sustainable. This will require the support of its shareholder,” the Treasury said.

Acsa has asked for a three-year, R3.5bn guarantee.

“Acsa will be unable to repay the guaranteed debt without an injection from shareholders and has thus applied for an R3.5bn equity injection for 2020/21,” the Treasury said.

Because of Covid-19, the R304m generated in June 2020 is 83% below what was generated in June 2019. “Loss of revenue has resulted in losses of R492m in June 2020, whereas profits of R380m were generated in June 2019.” 

Acsa bosses told the committee the company forecasts cumulative net losses of R5bn over the 2020 medium-term expenditure framework up to 2022/23 (a cumulative R10.2bn loss by 2025/26).

With regards to Denel, the Treasury said the arms maker has not requested additional financial support but instead requested R504m to be used for working capital instead of repaying guaranteed debt.

The Treasury said Covid-19 has worsened Denel’s financial position and has contributed to its inability to honour financial obligations as operations have come to a standstill, namely payment of salaries, creditors, statutory payments (medical aid, tax, UIF) and debt payments (interest payments under guaranteed debt amounting to R3.415bn).

“Failure to meet financial obligations has resulted in labour unions taking the entity to court for unpaid salaries. Denel still faces the risk of being placed in business rescue or even liquidation,” the Treasury said.

The Post Office wants R4.9bn “in support”, the Treasury said: “R2.7bn is required for operations, R1.4bn in liabilities owed to Postbank, R300m for voluntary severance packages and R525m for other liabilities.”

The committee heard that if the shareholder department (communications) does not act to restructure and repurpose the entity, the Post Office will collapse.

“Government must decide whether the Post Office has a role to play as a delivery arm to government. If not, it must be drastically restructured as the entity will not be able to continue in its current form without yearly funding from [the taxpayer] to cover its losses,” the Treasury said.

“Revised financial targets for the 2020/21 financial year indicate a net loss of R2.1bn is projected for the year compared to the initial budget for the year of a loss of R177m,” the Treasury warned.

Other government entities have received billions of rand in taxpayer bailouts in previous years.

Eskom doesn’t generate enough cash to meet its costs and is surviving on bailouts. It has a debt of about R454bn, with a majority guaranteed by the government.

Last year, SAA was placed in business rescue because of its declining performance and its inability to pay its debts.

SA Express was placed in business rescue in February this year and was subsequently placed under provisional liquidation on April 29 2020 by the high court.