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Ailing entities will expect something from the 2025 Budget Speech on Wednesday (19 February), but the business case is weak and the prospects of success very low …
Over the past few years, the executives of state-owned enterprises (SOEs) have come to view the few days between the State of the Nation Address (Sona) and the budget speech as the test for just how seriously their entities are actually regarded.
It all tends to start well enough in the Sona, where the president – almost without fail – pronounces the state’s commitment to the viability of these institutions.
Where corruption and chaos have reigned, he promises to marshal in the right agencies and authorities to clean it all up.
Where management and leadership layers have been decimated, he delegates some minister to ensure that the right people are eventually appointed.
And where cash has dried up and business models have expired, he creates a commission of sorts and promises a range of solutions and injections that will fix it all within our lifetime.
For a developing state, such entities remain important tools for fostering development – which means they are laden with the dual mandate of commercial viability and addressing developmental goals aligned with the prevailing political mandate.
In the South African case, state entities have an even more complicated job as they are overseen by politicians whose understanding of the fundamentals of running critical entities is suspect at best but who equally refuse to yield when it becomes clear that new ideas are required to save ailing entities.
A key part of the problem is the unwillingness of politicians to acknowledge that the social and political mandate they purport to champion is reliant on the financial viability of each entity.
Perpetual rescue mission
In the absence of some sustainability and viability, the entities spiral into a perpetual rescue mission where taxpayers are compelled to foot the bill only because their elected officials cover their failures by tapping into the well of public resources – until even these start to run out.
For many years, the ANC government adopted a model of poor oversight that led to a relevance and operational abyss for many entities – which created a viability crisis across the system.
When they then appointed ill-suited directors and executives who either failed to note the creeping corruption or were complicit in it, the path towards operational and financial abyss was assured.
Some entities like Eskom and Transnet were strategically important enough for them to keep operating through the crisis and safe in the knowledge that their profile would ensure that bailouts would materialise eventually.
Under this sense of comfort, the discipline that should have materialised did not happen, and hence, the requests became an annual practice.
Competition …
Less strategic entities like SAA and the Post Office have a much more difficult proposition since they operate in sectors where much more agile players unburdened by political entanglements have emerged and thrived.
Through the shifting patterns of trade and consumer habits, such entities were left in the wake of their competitors. As more competitors emerged and thrived, the sense of importance previously associated with such entities gradually disappeared and no one – not even within political circles – could argue that they are strategically important enough to rescue at all costs.
The problem for those responsible for such decisions is that diminishing resources mean that creating a business case to rescue the ailing entity is much more difficult.
The Post Office
In the upcoming budget, the fate of the Post Office will loom large as the point of anticipation.
The business rescue team, which has managed to keep it on life support for the past couple of years, has indicated that in the absence of an immediate bailout, the prospects of keeping the doors open will rapidly disappear.
The recent passing of the Post Office Amendment Bill – which sought to vault the Post Office from its prehistoric mandate to something more modern, comes far too late in the process and will simply not be the fix it was envisaged to be.
For such entities, difficult reflections about their mandate, their relevance to society, and their viability need to be canvassed to ensure some prospects of long-term survival.
Anything less than a brave reflection will mean that the Post Office will not be the last one to enter the list of those that were once ubiquitous but are now condemned into the scrapheaps of history.
