Publication Date: 26/06/2018

The ministers of Public Enterprises and Finance, Pravin Gordhan and Nhlanhla Nene, as well as the Deputy Minister of Finance, Mondli Gungubele, met with the boards of the Banking Association South Africa (BASA) and the Association for Investment and Saving SA, on Tuesday 19 June 2018.
The meeting was briefed on the substantial progress government has made in strengthening governance and management at state-owned enterprises (SOEs). The ministers however pointed out that some of the companies are experiencing severe financial and operational difficulties and need assistance from business and other stakeholders.
Banks and asset management companies indicated that they are willing to work with government and make use of their expertise and resources to help resolve the difficulties being experienced by SOEs.
BASA acknowledges that state enterprises – like Eskom and Transnet – provide essential services that are necessary for the day-to-day functioning of the economy. If any of them defaults on its debt or goes into bankruptcy, the impact on the economy, businesses and government finances will be damaging.
Consequently, it is imperative that all sectors of society work with government to ensure the sustainability of those SOEs that are critical to building the investment and business confidence necessary for the economic growth and to overcome poverty, unemployment and inequality.
The sustainability of SOEs is critical to the financial services industry because of the exposure banks and asset managers have to these enterprises. But, ultimately, ordinary South Africans, who depend on secure employment or state grants to provide for their families, would bear the brunt of the resulting economic hardship.
As responsible corporate citizens, banks will do what they can to avert this. The need to take a strategic view and prioritise the funding of SOEs, based on their economic importance, was highlighted in the meeting.
In assisting government to stabilise SOEs, banks will need to remain within the prudential requirements intended to safeguard depositors’ money and shareholder capital invested in their businesses. All parties at the meeting agreed that the stability of the country’s financial system cannot be put at risk.
Government agreed to consider options to underwrite the funding of SOEs and work with financial institutions to ensure their long-term sustainability. This is essential to assure banks, their customers and their shareholders, that state enterprises will be able to meet their future obligations.
Our engagements with government are ongoing. The intended outcome is SOEs that are financially and operationally sound and that can contribute to the social and economic development of the country.