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New framework for state-owned companies

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Old 10-22-2014, 03:51 PM   #1
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Sa New framework for state-owned companies

Government has proposed a new framework for funding state-owned companies, which will include closer monitoring of such entities.

In the Medium Term Budget Policy Statement (MTBPS) tabled in Parliament on Wednesday, National Treasury has said that state-owned companies and public entities play important roles in realising government’s economic and social mandate.

These entities need to be financially sound and operationally effective, contributing to development without draining the fiscus.

“Government is proposing a new framework for funding state-owned companies that will distinguish purely commercial activities from the costs of exercising their developmental mandate,” said National Treasury in the MTBPS.

The new framework will include closer monitoring of these companies to ensure efficient delivery on government priorities while simultaneously promoting improved commercial performance.

Briefing reporters ahead of tabling his maiden MTBPS, following his appointment to the post several months ago, Finance Minister Nhlanhla Nene said they were looking at state-owned companies closely.

“State-owned companies are a risk we are watching closely. We are working with Public Enterprises Minister [Lynne Brown] to come up with a plan that deals with them comprehensively,” Minister Nene told journalists.

Over the medium term, any funding of state-owned companies will be contingent on the implementation of sound restructuring plans with strong government oversight.

According to the MTBPS, given the fiscal constraints over the next two years, capitalisation will only be funded by the sale of non-strategic state assets and will not be drawn from tax revenue or added to the debt of national government.

Government policy remained that state-owned companies should operate on the strength of their balance sheet.

The MTBPS noted that reforms are being undertaken at South African Airways (SAA), SA Express, the South African Post Office and the Land Bank.

While tabling the MTBPS, the Minister said that steps to safeguard power parastatal Eskom have been taken to secure its financial stability.

“Eskom will borrow a total R250 billion over the next five years supported by existing guarantees from government. Government will provide at least R20 billion of funding, raised through the sale of non-strategic assets. This will be deficit neutral.

“The capitalisation of Eskom will only occur once these funds are realised. If necessary, consideration will be given to a partial equity conversion of the R60 billion loan that has already been provided,” said Minister Nene.

Financial assistance to municipalities for free basic services will continue, ensuring that the poorest households are protected against rising electricity tariffs.

National Treasury noted that electricity supply will remain tight until the first units of the new Medupi power station located in Lephalale, Limpopo, come on line. -
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