A more intense and structured monitoring of state-owned companies and entities has been proposed by the government through a new funding framework.

This follows a statement made by National Treasury earlier this week, during the Medium Term Budget Policy Statement (MTBPS), that that SOCs and SOEs have significantly important roles in realising government’s economic and social mandate going forward.

The statement outlined: “Government is proposing a new framework for funding state-owned companies that will distinguish purely commercial activities from the costs of exercising their developmental mandate.”

The new framework will ultimately ensure efficient delivery on government priorities while simultaneously promoting commercial performance.

Finance Minister Nhlanhla Nene stated at the event that, “State-owned companies are a risk we are watching closely. We are working with Public Enterprises Minister to come up with a plan that deals with them comprehensively.”

According to the MTBPS, with the fiscal constraints over the next two years in mind, capitalisation will only be funded by the sale of non-strategic state assets and will not be drawn from tax revenue, or added, to the debt of national government.

Policy states that SOCs should not over-extend themselves and operate on the strength of their balance sheet.

Nene also said steps to safeguard Eskom have been taken to secure its financial stability.

“Eskom will borrow a total R250 billion over the next five years supported by existing guarantees from government. Government will provide at least R20 billion of funding, raised through the sale of non-strategic assets. This will be deficit neutral. The capitalisation of Eskom will only occur once these funds are realised. If necessary, consideration will be given to a partial equity conversion of the R60 billion loan that has already been provided,” explained Nene.