SOEs rack up losses of R172bn in five years – National Treasury

A Transnet train on 23 August 2022 in Hopetown, South Africa. Picture: Gallo Images/Misha Jordaan Turning around the financial performance of state-owned enterprises (SOEs) is central to improving South Africa’s economic performance, says National Treasury in its 2026 Budget Review. “At Eskom, this requires strengthening energy security and reducing fiscal pressure on the state, while Transnet needs to stabilise the performance of rail and ports and expand export capacity.” Major state-owned companies collectively made losses of R172 billion in the past five years despite being mandated to operate as sustainable, profit-generating businesses that can borrow based on the strength of their balance sheets.

Many rely on the public purse for financial support despite operational gains. Minister of Finance Enoch Godongwana says government is shifting the composition of spending towards growth-enhancing public infrastructure – over the medium term, public sector spending on infrastructure will exceed R1 trillion and R577.4 billion of this will be spent by SOEs and other public entities. The review states that in the most recent financial year, the finances of major SOEs improved, with return on equity shifting from -15.6% in 2023/24 to 3.7% in 2024/25.

“Profitability was supported by efforts to improve efficiency, strengthen revenue generation and optimise balance sheets. “However, this relied heavily on government support, particularly at Eskom and Transnet.” The review says Eskom posted its first profit since 2016/17, while Transnet improved its performance but continued to fall short of its operational and financial targets. Development finance institutions such as the Development Bank of Southern Africa (DBSA) and the Industrial Development Corporation (IDC) showed mixed performance but did not require additional government assistance. The review notes that apart from the Road Accident Fund (RAF), which continues to be deep in deficit, social security funds and the Government Employees Pension Fund remain sustainable over the medium term.