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Let go of the old, ring in the new, says finance minister, Godongwana

Finance Minister Enoch Godongwana delivered his maiden Medium Term Budget Speech (MTBPS) in Parliament on Thursday saying none of the country’s ailing SOEs would be receiving funding. Picture: Phando Jikelo/African News Agency

Finance Minister Enoch Godongwana delivered his maiden Medium Term Budget Speech (MTBPS) in Parliament on Thursday saying none of the country’s ailing SOEs would be receiving funding. Picture: Phando Jikelo/African News Agency

Published Nov 12, 2021

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CAPE TOWN - South Africa should be prepared to let go of state-owned companies that are “no longer considered strategically relevant,” said Finance Minister Enoch Godongwana in his Medium Term Budget Policy Statement Speech (MTBPS) in Parliament on Thursday.

Describing his stance as ’’tough love’’ Godongwana told MPs that none of the country’s ailing SOEs would be receiving funding in this year’s MTBPS.

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“Many SOCs, however, have been badly managed and have failed to deliver. In many instances they have also been devastated by state capture, making them increasingly reliant on government support. Since 2013, the government directed more than R290 billion to bailout state-owned companies, at the expense of important social expenditure. Going forward, the restructuring of state-owned companies, informed by an assessment of their strategic relevance, is a priority.

“In this MTBPS, no additional funding is provided for state-owned companies. The exception to this is where guarantees have been called by creditors and conditions have been met by the SOC in question, within the context of their strategic importance. We must be prepared to consolidate some of our state-owned entities and let go of those that are no longer considered strategically relevant,” he said.

Godongwana said the key to solving the country’s development challenges was the need to push ahead with structural reforms necessary to unlock the growth of the economy.

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These include bringing additional electricity capacity into the grid in addition to fixing Eskom.

Godongwana said focus should also be on improving the efficiency of South Africa’s logistics infrastructure to support export growth.

“In this regard, the government has announced the corporatisation of Transnet’s National Ports Authority as an independent subsidiary of Transnet and appointed an interim board. This will create incentives for efficiency and competitiveness between port service providers – reducing delays, improving services and introducing cost discipline. Transnet Freight Rail will allow third-party access to the freight rail network by the end of 2022. Allowing private rail operators to use the freight rail network will bolster system volume and capacity,” he said.

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The strength of South Africa’s economic recovery will depend on the roll out of vaccines, Godongwana said.

“A higher take up of vaccines will reduce the risks of future waves of the pandemic and associated disruptions to economic activity. In the first half of 2021, the South African economy recovered more quickly than expected, reflecting less stringent Covid-19 restrictions, along with lower interest rates, support from strong international demand and higher commodity prices. We now expect the South African economy to grow by 5.1% in 2021, from a 6.4 % contraction in 2020. Over the next three years the growth of the local economy is expected to average 1.7%, reflecting some structural weaknesses such as inadequate electricity supply,” he said

Cape Times

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