Some of the country’s largest state owned enterprises (SOEs) are in financial trouble. Daniel Silke, an independent political analyst, stated at the Mazars’ Cape Town Budget Review 2015/2016 notes that there are over 800 SOEs.
In the Budget Speech, Finance Minister Nhlanhla Nene explained that Eskom will be receiving a R23 billion capital injection. It was also proposed that a temporary increase in the electricity levy of two cents per kilowatt hour be implemented to assist with management of the utility, until the power shortage is over.
Di Seccombe, senior tax manager at Mazars, commented that South Africans will be paying more for a service that is in short supply. She questioned whether this increase in the electricity levy will go towards another Eskom bailout, which is not its purpose.
Professor Alwyn Louw, Monash South Africa Academic President, said: “The electricity tariff changes are but one example of changing consumer behaviour at an individual level to reward responsible behaviour. The combination will inevitably remove money from the household budget which reduces the ability to invest in savings.
“The expectation is that such a situation will assist to bring stability in the capacity and service delivery of Eskom. This will justify the investment by enhancing growth that will benefit the consumer. Failure to realise this will however imply a direct negative impact on the economy and individual taxpayers.”
The Treasury has also made guarantees to South African Airways (SAA) of R14.4 billion, “of which the airline has drawn R8.3 billion.”
The South African Post Office (SAPO) is also facing financial problems. According to the Budget Review 2015: “During 2014/15, a R1.7 billion going-concern guarantee and a R270 million guarantee to secure and extend its overdraft facility were issued with conditions linked to SAPO’s turnaround strategy.”
HB Klopper, associate professor of marketing and head of the marketing department at Monash South Africa highlighted that the failing of these SOEs has a negative effect on the tax payer.
“It has an adverse impact on the tax payer because of poor service delivery and the additional funds needed by companies that are funded by taxes to fund their business expenses. It removes money from investment in growth and drains money for stimulating growth, while it inhibits the growth potential of the economy due to the pressures it places on manufacturing and service delivery in general.
“Although large investments in providing parastatals with financial support have been announced (R23 billion in three instalments to Eskom) no long term solutions to have been announced as yet,” noted Klopper.