In his recent Budget Speech, Minister Enoch Godongwana reinforced the commitment to award Transnet R47 billion in debt guarantees to help bail it out of its R130 billion debt and R13 billion annual interest.
This marks a second consecutive bailout for Transnet, as in the 2023 budget, Transnet was granted R2.9 billion to repair the damage from the KwaZulu-Natal floods of 2022 as well as an additional R2.9 billion for restoring long-standing locomotives.
Despite the bailout, in July 2023, Transnet reported having 363 long-standing locomotives (long-standing locomotives are a fleet of locos that have been parked for periods exceeding 90 days due to unavailability of spares for repairs). The number of long-standing locos kept rising months after the R2.9 billion cash injection was promised. These parked machines mean not only that 363 of them are wasting away for a lengthy period of time, but Transnet itself links them to the decline of revenue, as fewer goods can be hauled when more locos are out of operation for extended periods. This costs the economy billions.
Expectations
Transnet’s interventions to restore the long-standing locos did not meet expectations. The state-owned enterprise (SOE) commissioned a team to do repairs and restorations to the long-standing locomotives and the project came up short, bringing back only 61 locos into operation.
Now Transnet joins the long line of failed bailouts, standing right behind other SOEs such as Denel, SAA, Landbank, SA Express, and Eskom. After historically rewarding these SOEs for their poor governance, malfeasance, and corruption with over a decade’s worth of eye-watering bailouts and debt write-offs to the tune of R331 billion rands, the bailed-out entities continue to make huge losses.
Bailouts have given these entities a get-out-of-jail free card, with hardly anyone in cabinet or executives in the entities ever being held accountable for mismanagement and maladministration. Bailouts beget more bailouts and poorer outcomes for SOEs as the country has gone from issuing bailouts of nearly R3 billion in 2014 to bailouts of more than R300 billion in 2023. Eskom claims over half of this growing amount. Essentially these bailouts are taxpayer funds going down the drain, since there has been no real improvement in the state’s companies.
Structural reforms
Saving SOEs requires not just throwing billions of taxpayers’ rands down the bottomless pit of debt guarantees. Instead, government should introduce structural reforms to end preferential procurement in favour of value-for-money procurement. It should replace cadre deployment with appointments on merit and curtail government spending to free up revenue and stay clear of the recent precedent of dipping into government reserves to fish out money for non-value-adding expenses such as debt-servicing costs.
Bailouts are a great stain on this country’s record. Through them, kakistocracy is enabled and rewarded, and as with everything in life, you only get more of what you incentivise and less of what you punish.
Punishing behaviour that has compromised state-owned companies by implementing Chief Justice Zondo’s state capture recommendations should be prioritised over rewarding such delinquent behaviour through bailouts.
[Image: Bob Adams, https://commons.wikimedia.org/w/index.php?curid=57483664]
If you like what you have just read, support the Daily Friend