SAA is now virtually crippled by a staggering R1.1bn owed by the Zimbabwean government, leaving its recovery path shrouded in uncertainty. Picture: Kim Ludbrook/EPA
THE meeting of Parliament’s Standing Committee on Public Accounts (Scopa) last Tuesday has thrust into the spotlight the precarious nature of South Africa’s state-owned enterprises (SOEs)—entities that should be engines of growth are, for now, mired in debt and mismanagement.
Serious allegations of financial mismanagement were laid bare regarding three critical state-owned entities: SA Airways (SAA), the Passenger Rail Agency of SA (Prasa), and Transnet.
With mounting debts and operational challenges said to have been exacerbated by the Covid-19 pandemic, Scopa underscored an urgent need for more than just funding—an estimated R100 billion to R120bn for Transnet and R120bn for Prasa. Without these capital injections, the viability of these entities hangs in the balance.
The discussion began with stark revelations about SAA’s precarious financial stability. The airline is now virtually crippled by a staggering R1.1bn owed by the Zimbabwean government, leaving its recovery path shrouded in uncertainty.
Chairperson of Scopa, Songezo Zibi, succinctly articulated the crisis: “The recovery from such a debt is critical to SAA’s long-term viability,” before turning his focus to the competitive landscape that poses an ongoing threat from private carriers.
Derek Hanekom, SAA’s Chairperson, confirmed the airline’s exit from the 2019 business rescue process but acknowledged lingering issues: “While we’re no longer in debt, we are still grappling with the repercussions of past mismanagement. Our recovery relies on the successful negotiation of this debt.” He emphasised the dire need for a cash injection, adding: “We are engaging banks to establish a loan facility, but current cash reserves remain critically low.”
Moreover, the potential of that cash injection hinges on whether they secure an equity partner, as Hanekom revealed: “Privatisation is not on the table, but we need partnerships to foster growth.”
As discussions shifted to Prasa, the documentation of financial mismanagement became increasingly concerning. Minister of Transport, Barbara Creecy, noted the agency’s recovery in restoring priority rail lines while simultaneously addressing its glaring governance challenges.
“We are working diligently to address the Auditor-General’s concerns about Prasa’s internal controls and ICT systems,” she said, asserting that the agency had achieved 87% of its operational targets.
Yet, despite this progress, Creecy acknowledged that vacancies in management roles remained unfilled. “These positions are critical to effective governance, and we aim to fill them by November.”
Prasa chief financial officer (CFO) Brian Alexander said: “We are transitioning to a cloud server environment to drastically improve our ICT internal controls,” highlighting that improvements in these systems should be ready by January.
Nonetheless, concerns remain regarding the R35 million reported losses and whether further investigations are warranted. “We need transparency in tracking these losses and an overhaul of our accountability measures,” he said.
Transnet faced the harshest critiques as members questioned its crippling R137bn debt. Creecy indicated that strategic initiatives aimed at countering theft and operational losses were in place, yet hard deadlines loomed. “We’ve had a daily war room established to enhance our operational outputs,” she said, but emphasised the bleak reality: “Transnet has only met 28% of its performance targets.”
Transnet CFO Nosipho Maphumulo reinforced the need for urgent action. “We are locking in cash flows of R154.6bn over the coming five years, but with debt obligations exceeding R120bn, the urgency for capital restructuring has never been more pronounced.” She highlighted that the reduction of irregular expenditure from nearly R4bn to R220m should not detract from the fundamental issues waiting to be addressed.
However, the EFF’s Mazwi Blose took a swipe at the government leadership, remarking: “If Transnet is collapsing due to corruption and lack of compliance, it’s time we reassess who is managing these state entities. Blind optimism won’t repair the damage.”
Highlighting accountability, MK Party’s Khayelihle Madlala warned: “We cannot allow private interests to diminish our national assets. The ongoing sabotage within Prasa needs thorough investigation, and we need proper oversight in management.”
The meeting concluded with an admission—the existing governance structures across these SOEs are ill-equipped for the challenges ahead. MPs unanimously expressed that stronger oversight and accountability measures were necessary to prevent financial catastrophes.
“State-owned enterprises should remain wholly owned by the public; their failures cannot lead us down the path of privatisation,” ANC’s Ntando Maduna said, underscoring that taxpayer money should not perpetuate mismanagement.
Creecy conceded: “We need to engage better with our stakeholders and ensure funds are utilised efficiently. An investment in our public transport system is an investment in the South African economy.”
The road ahead remains fraught with challenges, but without transformational governance practices and widespread scrutiny, the financial instability plaguing SAA, Prasa, and Transnet may evolve into an inescapable crisis.
Without an immediate and comprehensive overhaul of governance and financial practices, South Africa’s commitment to reviving these national assets may remain a hollow promise.
sizwe.dlamini@inl.co.za