Budget 2024: Predictions spotlight thrown on government stance of its SoEs

As the date approaches for Minister of Finance Enoch Godongwana’s Budget Speech on Wednesday, South Africans are brimming with anticipation.

Among the numerous issues that will likely be addressed, one topic looms large: the fate and future trajectory of state-owned enterprises (SOEs).

PricewaterhouseCoopers (PwC), a leading voice in economic analysis, has predictions regarding the government’s stance on SOEs.

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Over recent years, discussions surrounding the ‘rationalisation’ of these entities have been ongoing, the firm said.

PwC recalled that government said it was looking closely at which SOEs are still relevant for the country’s economy and which ones might not be needed anymore. Government has also previously said that they want to make things more efficient by combining companies that perform similar functions.

Performance and structure

PwC said that the urgency of addressing the performance and structure of SOEs cannot be overstated.

“Underperforming SOEs pose significant risks to the nation’s fiscal health and economic stability. Therefore, it is imperative that Budget 2024 provides a comprehensive update on the progress made in this regard,” the firm said.

PwC is also advocating for a more profound analysis of the role of SOEs in South Africa’s society and economy.

It says that a comprehensive cost-benefit assessment is urgently required to ascertain the true impact and value proposition of these entities.

“By understanding the tangible contributions of SOEs, policymakers can come up with strategies that maximise their benefits, while mitigating potential risks.

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“Budget 2024 presents a golden opportunity to announce the commencement of such assessments, signaling a commitment to evidence-based decision-making and proper fiscal management,” it said.

Eskom

Eskom, the state-owned electricity utility, stands as a prominent example of an SOE undergoing restructuring. While progress has been made, the pace of reform has been slower than anticipated, exerting a considerable drag on the South African economy. Thus, stakeholders are keenly anticipating a comprehensive update on Eskom’s restructuring efforts during the budget speech.

PwC says that clarity on timelines, milestones, and resource allocation will be important when it comes to instilling confidence in Eskom’s ability to navigate the challenges ahead and fulfill its critical role in powering the nation.

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Transnet

Transnet, the state-owned rail and port company, recently received a bailout of R47 billion from the National Treasury. This bailout, while quite substantial, falls short of Transnet’s initial request, prompting questions about the government’s long-term vision for the company. Budget 2024 presents an opportune moment for the government to tell of  its plans for Transnet, ensuring transparency and alignment with broader economic objectives.

As Godongwana prepares to deliver the 2024 Budget Speech, expectations are high, particularly regarding the trajectory of SOEs. PwC’s predictions and recommendations highlight the importance of proactive and strategic management of these entities to foster economic growth, stability, and prosperity in South Africa.