Who would want to buy SAA, Eskom?

Although nothing was said directly in the 2016 budget about the privatisation of state-owned enterprises, "something is coming", according to economist JP Landman. By Carin Smith.

Pravin Gordhan

Pravin Gordhan

Although nothing was said directly in the 2016 budget about the privatisation of state-owned enterprises (SOEs), “something is coming”, according to economist JP Landman.

At the same time, he said common sense seems to indicate that no one could really be interested in buying heavily indebted SOEs like South African Airways or Eskom.

SAA cannot become a liability, finance minister Pravin Gordhan said in a post-budget briefing.

SAA needs about R2bn to R3bn/year to survive, Gordhan also said in a reply to questions in parliament, Business Day reported on Friday. Budget 2016 does not provide for further capital injections or state guarantees for the airline.

In January, energy regulator Nersa started its public hearings as part of Eskom’s application to recover an additional R22,8bn through an electricity tariff increase.

As for a possible ratings downgrade, Landman said on a fiscal level the “credible budget” should prevent that from happening. However, lack of economic growth could tip SA up, making him less optimistic.

The problem is that taxes need to come down to encourage economic growth. Lower taxes, however, would mean a drop in government income which would lead to an increased deficit, which in turn would not sit well with ratings agencies.

“South Africa is in a tight spot,” said Landman at a post-budget event hosted by Deloitte.

He believes this could be opening the door for privatisation of SOEs.

“If one compares expenditure over the past three years with the respective budgets, you cannot say that treasury is not containing expenditure,” said Landman.

The big challenge, though, is how to get the economy growing. The global state of what Landman calls “secular stagnation” makes this even more challenging. This is a period of negligible or no economic growth, a greater propensity to save than invest, and deficient demand in the economy.

“We need extraordinary measures,” emphasised Landman. “The pressure is on companies for ‘structural’ transformation by improving productivity, and for this innovation would be needed.”

As for budget 2016 in general, he regards it as a balanced one, but added that the most important thing would be to see if government can actually now implement it.  — Fin24

Share this article

  • Davebee

    Let’s hope and pray it’s not the Gupta’s, they would make ENRON’s tariff’s look positively user friendly.

Why TechCentral?

We know that as a prospective advertiser, you are spoilt for choice. Our job is to demonstrate why TechCentral delivers the best return for your advertising spend.

TechCentral is South Africa’s online technology news leader. We don’t say that lightly. We believe we produce the country’s best and most insightful online tech news aimed at industry professionals and those interested in the fast-changing world of technology.

We provide news, reviews and comment, without fear or favour, that is of direct relevance to our fast-expanding audience. Proportionately, we provide the largest local audience of all technology-focused online publishers.

We do not constantly regurgitate press releases to draw in search engine traffic — we believe websites that do so are doing their readers and advertisers a disservice. Nor do we sell “editorial features”, offer advertising “press offices” or rely on online bulletin-board forums of questionable value to advertisers to bolster our traffic.

TechCentral, which is edited and written by award-winning South African journalists, cares about delivering top-quality content to draw in the business and consumer readers that are of most interest to technology advertisers.

We’d like the opportunity to demonstrate the value of directing a portion of your advertising budget to TechCentral, whether your company is in the technology field or not. Numerous opportunities exist for companies interested in reaching our audience of key decision-makers in South Africa’s dynamic information and communications technology sector. We offer packages that will deliver among the best returns on investment available in the online technology news space.

For more information about advertising opportunities, and how your organisation can benefit by publicising itself on TechCentral, please call us on 011-792-0449 during office hours. Or send us an e-mail and ask for our latest rate card and brochure.