Treasury: We are not being ‘reckless’ with bailouts

Many South Africans might think that Treasury is being “reckless” with bail outs to state entities, said Treasury’s Director General Dondo Mogajane.

Mogajane was briefing the select committee on appropriations on the 2019 Appropriations Bill. He was responding to concerns of members of Parliament about bail outs to state owned entities like Eskom and the SABC. He explained any government guarantees granted to state owned entities will not be without conditions

Mogajane recalled that earlier this year Treasury refused SABC a R3.2bn government guarantee because the state broadcaster had not met Treasury’s conditions.

“They did not meet the obligations they knew they had to fulfill and the business case was not strong enough. A guarantee can only be given if you do your business as normal and if it is successful, there is no need for a call on the guarantee,” he explained.

Finance Minister Tito Mboweni on Tuesday told the National Assembly that financial support to entities who requested it – SABC, SAA and Denel – will be made available from the state’s contingency reserve account.

Mogajane told the committee that “any portion” of the R3.2bn requested by the SABC will be granted when it has met “certain conditions”.

He told journalists on the sidelines of the briefing that some of the conditions are “soft” such as the appointment of a new board, which happened recently. There are 11 conditions Treasury has placed on the SABC, centered on the entity getting itself “in order” so that it can be financially sustainable.

The respective amounts that will be allocated to SAA and Denel will be determined as the appropriation process unfolds in Parliament, Mogajane said.

Government is not just bailing out state entities without consideration, he explained. There would be implications if these state-owned enterprises are not financially supported. If entities default on their obligations, lenders have a right to call a guarantee. This will result in cross-defaults across government’s contingent liability portfolio, Mogajane said.

Treasury has been operating under a very difficult environment, as tax revenues are not coming through and there is no economic growth. He said, however, SA is not a “failing state”.