As we approach the medium-term budget policy statement on October 30, finance minister Enoch Godongwana faces an almost insurmountable task: reviving hope in South Africa’s economy while addressing budget shortfalls amounting to hundreds of billions of rand.
South Africa is grappling with a budget crisis. In a context of slow or no economic growth, high unemployment, and stagnation, it feels like there’s “too much month at the end of the money”, as the saying goes. If our country were a household, we would be using credit cards to pay off other credit cards and taking out loans just to survive.
A key budget concern is the recent revelation that the basic education department is facing a shortfall of nearly R80bn. If not addressed, this could result in large-scale teacher layoffs across the country. Provincial education departments need R79bn simply to maintain basic programmes, and this could rise to R118bn by 2027. This isn’t a luxury — it’s a necessity. Instead of shrinking education, we should be expanding it, investing in our teachers, and supporting smaller classrooms so that every child has a chance to thrive.
Over the past decade, the government has spent R520.6bn bailing out SOEs, with a staggering R496bn going to Eskom alone.
This isn’t just a financial issue — it’s about the futures of 13-million children, the stability of 24,000 schools and the livelihoods of countless teachers. Without proper funding, dreams will be cut short and our education system will crumble.
Recent global crises have compounded these challenges. The 2008/2009 financial crisis, the Covid pandemic and other external shocks have pressured public finances, leading to higher debt and borrowing costs. This has diverted spending from essential services such as social programmes and infrastructure to fiscal consolidation efforts, elevating financial stability risks.
Several factors threaten the fiscal outlook, including volatile commodity prices, slow implementation of structural reforms and persistent bottlenecks in the transport and logistics sectors. State-owned enterprise (SOE) bailouts also pose significant risks to public finances. The government’s guarantee exposure is estimated at R416.3bn, and the poor financial condition of several SOEs makes this a serious concern. Over the past decade, the government has spent R520.6bn bailing out SOEs, with a staggering R496bn going to Eskom alone.
What makes these bailouts even more egregious is their contrast with the R457.1bn in accumulated cuts to the budgets of departments responsible for such frontline services as education, health care and housing. Between financial 2016 and financial 2021, the cost of SOE bailouts rose from 1% to 1.6% of GDP, steadily eroding vital public services.
We are sacrificing essential services — education, health care, housing and police — to prop up failing SOEs. Worse, most of these SOEs have not implemented credible turnaround plans. Instead of improving, their financial and service delivery performance has deteriorated.
The state must confront a fundamental question: are these bailouts a form of economic sabotage? They have weakened the state, created instability and harmed the broader population. South Africa now spends more on servicing its debt than on health care, and public investment in infrastructure is insufficient to spur the economic growth envisioned in the National Development Plan (NDP). SOEs are crucial players in key sectors and are meant to drive economic productivity and competitiveness. But if the government is paying a premium to bail them out, what is the dividend — monetary or otherwise — for the ordinary South African?
It’s time to reimagine the role of SOEs in our economy. They should contribute to structural economic change, innovation and industrialisation. Given the risk they pose to the fiscus, the government must reassess which sectors still require direct state intervention and how SOEs can become more efficient and competitive.
While we must invest in strategic sectors, we also need governance models that ensure operational efficiency. As a matter of urgency, the government needs to:
- Take stock of SOEs across all spheres and assess their relevance, their commercial viability and their success in dealing with market failures, and base reconfiguration and reform strategy decisions on this analysis;
- Address existing management and governance weaknesses; and
- Address deficiencies in the institutional framework, which entails standardising the legislative framework to enhance accountability and transparency and ensuring the National Treasury is equipped with the requisite tools to ensure that a policy ministry does not pursue an SOE policy that is financially unaffordable or creates large fiscal risks. The envisioned holding company for commercial SOEs may not be the panacea for weaknesses in the regulatory framework and could further entrench political interference, corruption and mismanagement.
• Maimane is leader of Build One South Africa
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