South Africa’s Treasury Holds Firm on No Bailouts for State-Owned Enterprises, Demands Reform

South Africa’s Treasury Holds Firm on No Bailouts for State-Owned Enterprises, Demands Reform. Image for illustration purposes only, generated with AI.

South Africa’s National Treasury has reaffirmed its refusal to provide bailouts to struggling state-owned enterprises (SOEs) in its 2025 budget, signaling a strict commitment to fiscal discipline and structural reform. The decision leaves critical entities like Transnet and Eskom facing urgent operational and financial challenges, raising questions about how they will fund essential capital investments without direct state support.

A Shift Toward Accountability

Thulani Tshefuta, a representative from the NEDLAC Social Constituency—a key platform for social dialogue between government, business, labor, and civil society—welcomed Treasury’s stance.

“The National Treasury is finally acting on what social partners have long advocated: fiscal discipline and accountability,” Tshefuta said. He argued that the failures of SOEs stem not from unfavorable market conditions but from poor governance and mismanagement.

“Many SOEs operate in sectors where private companies thrive and generate profits. The problem lies in how these public entities are run,” he emphasized.

Challenges for Key SOEs

With no bailouts forthcoming, SOEs like Eskom (energy) and Transnet (transport and logistics) must now find ways to self-sustain while continuing to deliver essential services. Tshefuta stressed that these entities must shift from relying on government funds to generating their own revenue and contributing to state coffers.

“They must prove their worth—not by begging for money but by becoming profitable and supporting infrastructure development,” he said.

Impact on Service Delivery

A major concern is whether SOEs can maintain service delivery—particularly in energy and transport—without state financial support. Tshefuta acknowledged that while the budget includes significant infrastructure investments, SOEs must operate more efficiently to avoid disruptions.

“The budget still allocates funds to critical sectors like transport, water, and energy, which are vital for both economic growth and household needs,” he noted. “But SOEs must use these investments wisely.”

Institutional Reforms Needed

To improve performance, Tshefuta called for:

1. Stronger governance – Appointing qualified, experienced leaders.

2. Reduced political interference – Letting SOEs operate independently without excessive policy micromanagement.

3. Clear mandates – Ensuring SOEs focus on their core developmental and economic roles.

“The discussion must move away from the idea that some SOEs are ‘too big to fail.’ Eskom doesn’t exist for its own sake—it exists to provide affordable, sustainable electricity,” he said.

Final Verdict: Adapt or Restructure

Tshefuta’s message was clear: SOE leaders must adapt quickly to the new reality where bailouts are off the table. He suggested that some entities may need restructuring or even privatization if they cannot meet their mandates.

“We must have the difficult conversation: Do we still need these SOEs? If so, how do we make them viable?” he concluded.

As South Africa pushes for fiscal sustainability, the pressure is now on SOEs to reform or risk obsolescence—a pivotal moment for the nation’s economic future.

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