South Africa P.I.G.: MANAGEMENT FAILURES

<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgL_nj83rHBCxFmGVB3Z1b33i8tyRhp5pjREXRYlgUTZ6ixlW4pw301LuGccsTNYtnNNYK2wRpDLMrve2GQ9x4PSf4NWMith4tQmItHqs3xzym1B6CVEZqS6-pG884vh8VYovVP4mhZbRo/s1600-h/bailouts-taxpayer-lose.jpg"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5394068378972274978" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgL_nj83rHBCxFmGVB3Z1b33i8tyRhp5pjREXRYlgUTZ6ixlW4pw301LuGccsTNYtnNNYK2wRpDLMrve2GQ9x4PSf4NWMith4tQmItHqs3xzym1B6CVEZqS6-pG884vh8VYovVP4mhZbRo/s400/bailouts-taxpayer-lose.jpg" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 350px; CURSOR: hand; HEIGHT: 350px" /></a> Almost R200bn was provided in financial assistance in 2008 and 2009 to state-owned entities. The figure comes from a response by the Treasury to parliamentary questions posed by the DA. The Treasury provided the DA with a list of guarantees, loans and transfers, which were supplied by the state-owned entities over a four-year financial period. DA member of parliament Dion George said: “Considering that the budget deficit is expected to range up to R100bn (8,5% of GDP) in a worst-case scenario, it is clear that halving the financial assistance to state-owned entities would save enough money to avert any budget deficit. "Financial support to state-owned entities has jumped by more than 1 000% from R16,6bn in 2007-2008 to an enormous R199bn in the following year.” “The financial burdens created by most of the state-owned entities are due to their poor management and corruption due to the ANC policy of cadre deployment and there is no reason why taxpayers should be bailing them out year after year,” the DA MP said. <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnLqK98iwGfQ-rO-Xhqy3XpGS2sAwAS_6HR2Zjkgn12FMGdttMDYCP6SoMjEX_3dEI0ZIjXMVaZcDh-GY_Sh99iyfLIY1Te052U8PbLE8CafY2LKIspKX2-w4eKqonfOIPEzdVMXIwVuI/s1600-h/bailouts-taxpayer-lose.jpg"></a> State-owned enterprises lining up for bail-outs These days there are many more people with their hands out. Except you won’t find them at traffic lights -- they represent state-owned enterprises and they’re lining up before government for bail-outs. With Finance Minister Pravin Gordhan projecting a tax revenue shortfall of between R50-billion and R60-billion that will lead to an increased budget deficit, it is still unclear whether and how government will finance its underperforming parastatals. As it stands, arms company Denel is seeking nearly R1.7-billion, the SABC R2-billion, Sentech R1.16-billion and South African Airways (SAA) up to R4-billion. Eskom reported a loss of R9.7-billion this week, but it appears it will not be asking for a bail-out from government. The Pebble Bed Modular Reactor (PBMR) project also requires R31-billion for the development of its demonstration and pilot fuel plants, and the Airports Company South Africa (Acsa) is buckling under the debt it has incurred for its airports upgrade programme and may also look for government assistance if it doesn’t get the increased tariffs it has asked the regulator for. The South African National Roads Agency, which has huge cash-flow issues, was recently given a R35-billion capital injection by government. Eskom Following the electricity crisis of 2008, Eskom secured a loan from government of R60-billion, with R177-billion in government guarantees, to fund its capital expenditure plans and bring additional electricity capacity on stream. It is still facing a large funding gap on a plan that will cost a total of R385-billion. But, critically, the utility has reported a loss of R9.7-billion for the financial year, raising the question of how it will sustain these losses, given the already substantial help it is receiving for its building programme. Denel Denel announced a R544-million loss. It is seeking close to R1.7-billion to replace R1.1-billion in government guarantees. The company is expected to be profitable only in 2011-12 and has failed to post a profit for almost a decade. Acsa Last week the Airports Company South Africa reported a 44% drop in earnings, a combination of the large debt it has incurred to fund its airport upgrades programme and the recession’s effect on airline traffic. Acsa has shelved the plan for a midfield terminal at OR Tambo International, cutting its planned capex expenditure for the next five years from R22-billion to R17-billion. Last year Acsa spent R5.2-billion upgrading OR Tambo and Cape Town Internat ional airports ahead of the 2010 World Cup and has begun work on a new R6.8-billion airport at La Mercy, outside Durban. Acsa has asked the regulator for a tariff increase, which it hopes will allow it to service its debt. SAA South African Airways is expected to report an operational profit of R1.2-billion before interest and tax. But the airline is facing a R1-billion fuel-hedging loss, a R727-million provision for 15 Airbus A320 aircraft that are on order and R1-billion Voyager liability that will result in a massive net loss. The end result will be a request for a government bail-out of anywhere between R1-billion and R4-billion. SABC The SABC’s financial woes have been well documented and it appears it owes money all over town. When the interim board decided to settle with former chief executive Dali Mpofu, the department of communications had to fork out R4.4-million because the broadcaster didn’t have any money. It has been reported that the SABC is looking for a R2-billion bail-out from government. Sentech With the digital migration process under way -- which will see South Africa’s television signal switched from analogue to digital -- Sentech is demanding more funding. Government has committed just short of R1.18-billion to Sentech but will probably need to provide a further R1.16-billion. Government also faces a major shortfall for its set-top box subsidy programme. A reported R400-million is on the table, but an estimated R2.45-billion is required. In addition, only R20-million was allocated for the vast educational campaign that will be needed to inform consumers about the digital migration process. Communications Minister Siphiwe Nyanda has admitted that he will have to lobby treasury for further funds. PBMR The PBMR’s demonstration and pilot fuel plants have had their costs almost doubled to R31-billion. Public Enterprises Minister Barbara Hogan said recently that government remains committed to the PBMR project and that its funding was being assessed. So far the PBMR project has received R9-billion, of which it has spent R8-billion. PBMR has about 920 staff and annual running costs of R1-billion. Transnet Transnet, one of the country’s best-performing parastatals, reported a profit of R5-billion in June, down 23% from last year. Acting chief executive Chris Wells said that next year Transnet would launch its international bonds, as it was determined to raise almost half of the R80-billion in capital it needs for its multibillion-rand projects.

R200bn spent to save state entities

Almost R200bn was provided in financial assistance in 2008 and 2009 to state-owned entities. The figure comes from a response by the Treasur...

<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtm9ubrxfl9oBziekwdlRh1gz7cJ8cigTnjYr7DWYB0gM2dcnnxB0Z_otr2-AZcROXSiIqTbNPT8gZdmnMD1bnt3Ls-WlULSXeAaZpnSNHSUvPS3Lo4IzzsZ5u1BEV5bUOBzSh4BpXbA0U/s1600-h/sabc-news.jpg"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5339060593285964242" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtm9ubrxfl9oBziekwdlRh1gz7cJ8cigTnjYr7DWYB0gM2dcnnxB0Z_otr2-AZcROXSiIqTbNPT8gZdmnMD1bnt3Ls-WlULSXeAaZpnSNHSUvPS3Lo4IzzsZ5u1BEV5bUOBzSh4BpXbA0U/s400/sabc-news.jpg" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 300px; CURSOR: hand; HEIGHT: 200px" /></a>The SABC is out of cash and is sitting on a deficit of almost R800-million. The broadcaster is seeking a bail-out of R1.5-billion. "Cash flow has been aggravated by rights payments [the costs of programme purchases] and slow-paying debtors," said Robin Nicholson, the SABC's chief financial officer. Independent producers have not been paid, workers will not receive annual increases and various other debtors complain about not being paid. Government is the biggest advertiser on the SABC and its slow payment systems are a key factor in the crisis. SABC News International, the sprawling empire of former editor-in-chief Snuki Zikalala, has been the largest cash-drain. Three of its 12 bureaux have already been closed and more are likely to go. The channel's start-up costs were estimated by Empire magazine at R240-million for 12 bureaux and a R45-million studio, and budgeted annual running costs run at R60-million. Now just a year old, the channel has not made one cent in revenue. Analysts suggest that viewership never climbed beyond a few thousand eyeballs as costs escalated. The SABC is likely to seek loans of R1.5-billion on the financial markets backed by support from government. In addition, it is lobbying the South African Revenue Service for VAT exemption on TV licence payments and for a state subsidy for those South Africans who watch television and listen to the radio but who are too poor to pay the broadcaster. Officially in austerity mode, the SABC has promised an end to profligacy. Some other areas to watch out for include: <ul><li>A 70% increase in the cost of consultants, from R129-million in 2007 to R220-million in 2008. At the same time permanent headcount has grown, suggesting there are two parallel sets of staff running the place. </li><li>Matilda Gaboo, the SABC's former head of international programme buying, spent R49-million on programmes that were never aired, according to an internal audit report and one by Cliffe Dekker Hofmeyr and Comperio Forensics. The Sunday Times reported that only 38 of 165 deals done by Gaboo had been analysed by March, suggesting the wasteful expenditure might be much higher. </li><li>Mafika Sihlali, the SABC's former legal officer, allegedly defrauded the broadcaster of R1.8-million. </li></ul>In 2008, the year in which the SABC suffered serial management failures, the top dogs rewarded themselves with massively inflated incentive bonuses: <ul><li>Former news and current affairs boss Snuki Zikalala: R2.25-million, an increase of 46.05% a year; </li><li>Acting chief executive Gab Mampone: R1.95-million, an increase of 230%; </li><li>Chief people officer Phumelele Ntombela-Nzimande: R1.7-million, an increase of 59.72%; </li><li>Acting chief operating officer Mvuzo Mbebe: R1.9-million, an increase of 30%; and </li><li>Chief financial officer Robin Nicholson: R3.3-million, an increase of 18.4%. </li></ul>

Out of cash SABC seeks R1.5-billion bail out

The SABC is out of cash and is sitting on a deficit of almost R800-million. The broadcaster is seeking a bail-out of R1.5-billion. "Cas...

South Africa P.I.G.

R200bn spent to save state entities

Out of cash SABC seeks R1.5-billion bail out

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