Treasury maintains firm stance on not giving SOEs bailouts
CAPE TOWN - National Treasury has maintained its firm stance on state-owned enterprises (SOEs), saying it's determined to apply the fiscal strategy.
Treasury will continue the trend of not bailing out SOEs from the previous two budgets, even though it will offer guarantees to support entities like Transnet to allow it to execute its capital investment programme and do business in market.
Minister Enoch Godongwana and Treasury officials on Friday briefed a joint meeting of Parliament's four finance committees from both houses on the budget and fiscal framework.
Struggling SOEs failed to get a mention in the third version of the 2025 budget that was tabled on Wednesday, with no bailouts in sight over the medium term.
National Treasury Director-General Duncan Pieterse told members of Parliament (MPs) that this was part of their fiscal strategy to contain costs.
"Of course, this budget maintains the strategy of ensuring that we do not provide or recommend large balance sheet support or bailouts to state-owned companies."
While there are no bailouts on the cards, state-owned companies, public entities, and municipalities will together fund 72.7%, or R748.5 billion, of total public-sector capital investment from their budgets.
The Passenger Rail Agency of South Africa (PRASA) will also benefit to the tune of R66.3 billion, out of which R18.2 billion will go to the rolling stock fleet renewal programme.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Citizen
an hour ago
- The Citizen
PPC: Why is it so expensive to produce cement in SA?
Calls on government to find out – and says it must also address public safety and unfair competition concerns. JSE-listed cement and building materials producer PPC believes the government should pay attention to why it's so costly to produce cement in South Africa – despite its confidence that the new R3 billion cement plant it's building in the Western Cape will enable the company to increase its competitive edge against cement imports. PPC CEO Matias Cardarelli on Monday (9 June) said the government also needs to address the outsourcing of cement blending to independent blenders from a public safety and fair market competition perspective. Cardarelli mentioned that it's very costly to produce cement in SA compared to other countries, which is the reason cement has consistently been imported into the country for many years. ALSO READ: Treasury bans use of imported cement on all government-funded projects Levelling the playing field Referring to the government, he said it should play a role in creating a level playing field for local cement producers against importers, adding that more than one million tonnes of cement has been imported into the country in recent years, however, he emphasised that imported cement is not PPC's priority. 'We are becoming more modern and efficient and we are sure that we are going to compete going forward.' According to Cardarelli, the South African cement sector hasn't benefitted from the designation of cement for infrastructure projects, as it has not seen 'the infrastructure plan by the government unfold'. He approves of the planned R1 trillion infrastructure investments by the government and is confident the government of national unity will get the ball rolling, but 'so far they have not executed that plan'. ALSO READ: PPC to sell lime business for R515 million Competition He said international players are entering the South African market and two Chinese international companies have bought assets into the country, with rumours that a third player may be joining them soon. Apparently, this company will bring in new technology and change the market landscape. This is a reference to Mamba Cement, which is jointly owned by the Jidong Development Group and the China-Africa Development Fund – as well as the acquisition of Natal Portland Cement (NPC) by China-based Huaxin Cement. Cardarelli said PPC's plans include replacing its two old plants in the Western Cape with a new plant in two years' time, which means the company will own the two newest and most modern plants in SA – while its third plant is also 'pretty modern'. He added that its two old plants are unable to run efficiently from a cost margin and environmental perspective, and that the imminent project is focused on lessening PPC's environmental impact while increasing its financial outcomes. However, Cardarelli said the decision to build the plant was also influenced by the fact that someone else would eventually have taken the initiative, which would affect PPC's position in the market. He added that it's a perfectly valid process worldwide to blend cement with extenders – and that PPC and NPC have their own blending plants. ALSO READ: PPC highlights impact of cement imports on itself and the economy A public safety risk However, he said PPC studies have routinely shown that in some cases that blended cement produced by independent blenders, which is then distributed into the market, has low standard strength. Cardarelli stated that this is a public safety risk. 'If you are not producing cement at the standard required by South African legislation and worldwide designation, there is a real risk that cement will not have the strength for the uses they are giving to that cement. 'I'm not saying that all blended cement shows that low strength standard, but some have consistently shown that,' he said. 'When you sell cement under the strength needed, the cost of that cement is going to be cheaper, and that is why the sector is facing unfair competition from independent blenders.' ALSO READ: Cement industry facing improved operating environment PPC on upward trajectory Despite a 1.9% decrease in revenue to R9.87 billion in the year to end-March, PPC on Monday reported a 28% increase in earnings before interest, tax, depreciation and amortisation (Ebitda) to R1.59 billion. PPC's Ebitda margin improved in the year to 16.1% from 12.3%. Headline earnings per share grew by 110.5% to 40 cents from 19 cents. An ordinary dividend per share of 17.6 cents was declared, which is more than 28% higher than the 13.7 cent dividend declared in the previous year. Awakening the giant Cardarelli said implementing phase one of PPC's 'Awaken the Giant' strategic turnaround plan has resulted in a step change in the group's margins, profitability, and cash generation, which are the highest since its 2018 financial year. 'This early success is largely as a consequence of a fundamental change in our strategic direction, the organisational culture, and an absolute focus on our core competencies,' he said. Cardarelli is increasingly confident about the outlook for PPC. He said optimising PPC's competitive position in the current markets will better prepare the company for market changes and that it remains cautiously optimistic about the construction market uplift in South Africa, but does not know the base or scale. 'So our plans are based on a scenario of low to no growth in demand while we keep fully ready to capture any growth opportunity when finally this long negative construction cycle comes to an end – and it will come to an end. 'At the same time, we will continue to implement price adjustments. Market share for us does not come at all costs and, through [a] competitiveness strategy, we naturally create the conditions for market share recovery.' This article was republished from Moneyweb. Read the original here.
Daily Maverick
5 hours ago
- Daily Maverick
Stocks rise, dollar tentative ahead of US-China talks outcome
Investors hold nerve ahead of details from U.S.-China talks Stocks gain, dollar pares some losses JGB yields fall from record highs By Rae Wee and Johann M Cherian SINGAPORE, June 10 (Reuters) – Stocks were buoyant and the dollar remained on guard on Tuesday as trade talks between the United States and China were set to extend to a second day, with tentative signs tensions between the world's two largest economies could be easing. US President Donald Trump put a positive spin on the talks at Lancaster House in London, which wrapped up for the night on Monday and were set to resume at 0900 GMT on Tuesday. 'The fact that we're still up here near record highs, does suggest that we are seeing the market accept what has been said by Trump and when you look at some of the other comments from Lutnick and Bessent, to me it seems to suggest that they are relatively happy with the progress,' said Tony Sycamore, a market analyst at IG. 'But the market always likes to see some concrete announcements.' As Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer were set to meet for the second day with their Chinese counterparts, much of investors' focus has been on the progress of the talks. Any progress in the negotiations is likely to provide relief to markets given Trump's chaotic tariffs and swings in Sino-U.S. trade ties have undermined the world's two biggest economies and hobbled global growth. Stocks advanced in Asia, extending their rise from the start of the week. MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.5%, while Nasdaq futures gained 0.62%. S&P 500 futures edged 0.43% higher. EUROSTOXX 50 futures and FTSE futures both added roughly 0.1% each. In Tokyo, attention was also on the Japanese government bond (JGB) market, following news that Japan is considering buying back some super-long government bonds issued in the past at low interest rates. The yield on the 10-year JGB fell one basis point to 1.46% in early trade, while the 30-year yield slid 5 bps to 2.86%. Yields on super-long JGBs rose to levels last month due to dwindling demand from traditional buyers such as life insurers, and jitters over steadily rising debt levels globally. 'The volatility at the super-long segment of the curve stems from a supply-demand imbalance that has been brewing since the BOJ embarked on balance sheet normalisation,' said Justin Heng, APAC rates strategist at HSBC Global Investment Research. Japanese Finance Minister Katsunobu Kato said on Tuesday the government will conduct appropriate debt management policies while communicating closely with market participants. In currencies, the dollar attempted to regain its footing after falling on Monday. Against the yen, the dollar was up 0.45% to 145.25. The euro fell 0.28% to $1.1387 while sterling slipped 0.2% to $1.3523. Trump's erratic trade policies and worries over Washington's growing debt pile have dented investor confidence in US assets, in turn undermining the dollar, which has already fallen more than 8% for the year. The next test for the greenback will be on Wednesday, when US inflation data comes due. Expectations are for core consumer prices to have picked up slightly in May, which could push back against bets of imminent Federal Reserve rate cuts. The producer price index (PPI) report will be released a day later. 'May's US CPI and PPI data will be scrutinised for signs of lingering inflationary pressures,' said Convera's FX and macro strategist Kevin Ford. 'If core CPI remains elevated, expectations for rate cuts could be pushed beyond the June 18 FOMC meeting.' Traders see the Fed keeping rates on hold at its policy meeting next week, but have priced in roughly 44 bps worth of easing by December. In the oil market, prices edged up, with Brent crude futures gaining 0.24% to $67.20 a barrel. US West Texas Intermediate crude was last up 0.25% at $65.45 per barrel after hitting a more than two-month high earlier in the session.
Daily Maverick
11 hours ago
- Daily Maverick
Small business, big problems — SA's entrepreneurs still face uphill battle
In post-pandemic South Africa, the phrase 'small business is the backbone of the economy' has become something of a national mantra. Small and medium enterprises account for more than 60% of jobs and roughly 40% of GDP, according to estimates from Stats SA and the Treasury, yet continue to face regulatory bottlenecks, financial exclusion and bureaucratic roadblocks that larger corporates are typically better equipped to manage. Business Maverick's latest webinar, 'Small Business, Big Problems: What Government Could Be Doing', brought together Business Maverick's editor, Neesa Moodley, Sourcefin CEO Joshua Kadish and Regent Business School's academic dean, Dr Shahiem Patel, for a candid conversation on why South Africa's entrepreneurs still face an uphill battle — and what could actually unlock progress. Forget the pitch deck: start anyway 'There's a shift,' said Patel, referring to the changes in the small-to-medium business environment in South Africa. 'You don't really need capital to launch a business. You need finance to scale a business.' This mindset shift — from funding as a prerequisite to funding as a growth tool — was echoed throughout the session. Entrepreneurs today launch Instagram stores and TikTok businesses in under an hour. What they need, increasingly, is not startup capital, but scale capital, according to Patel. Kadish agreed: 'Traditional banks in South Africa base credit decisions on past performance, collateral and tax compliance. But early-stage SMEs [small and medium enterprises] don't tick those boxes. What they need is forward-looking credit.' The irony? The very regulations designed to protect consumers are choking the businesses meant to employ them. 'It's not just red tape,' noted Moodley. 'It's the weight of compliance — especially when you're a one-person startup juggling five roles.' Death by paperwork Kadish outlined an inhibiting bureaucracy where something as basic as opening a bank account requires repeated Fica (Financial Intelligence Centre Act) submissions, even across the same financial group, causing needless hurdles for small businesses looking to enter the market. 'There's no central repository,' he noted of the process required for the verification of a business and the personal documentation required for everything from opening a bank account to lines of credit. 'You Fica yourself 14 times for 14 institutions. And even then, it takes a week to open a transactional account.' And compliance hurdles don't end there. New policies — like the Ultimate Beneficial Ownership filing regimen — threaten deregistration for startups unaware of such technicalities. Tax complexity, uncertainty about the Protection of Personal Information Act, and ambiguous VAT obligations compound the confusion. 'We need to stop seeing regulation as an inhibitor,' said Patel. 'It can be an enabler — if implemented accessibly.' Both speakers emphasised the need for a single digital compliance portal — a centralised, Application Programming Interface-enabled interface for the SA Revenue Service; Companies and Intellectual Property Commission; Compensation for Occupational Injuries and Diseases Act; Unemployment Insurance Fund, and others. The technology, they insisted, already exists. What's missing is the political will — and a user manual. A hurdle for the informal sector When asked about support for the informal sector, where millions of rands move in daily trade without tax filings, documentation, or even bank accounts, Kadish was blunt. 'Without documentation, you're confined to the informal sector,' said Kadish. 'You'll never really graduate.' The post-Covid boom in contactless payments (via tools like Yoco or SnapScan) offers new data trails — but even these haven't brought the informal economy fully into the funding fold. 'Financial institutions have long treated informal trade as no-go zones,' explained Kadish. 'That's slowly changing. But we need tailored products, not copy-paste corporate credit models.' Patel added that policy incentives, like VAT breaks or employment-linked tax deferrals, could catalyse formalisation without suffocating early-stage ventures. Red tape and repayment Public procurement — a potential growth engine for SMEs — has its own catch-22. 'To do business with the government, you often need a performance guarantee. But no one wants to issue those to small businesses,' explained Kadish. 'It's the same cycle: no track record, no credit; no credit, no growth.' 'The education gap is real,' said Patel. 'So is the mentorship gap. We need layered support — formal, informal, and from peers.' Lessons from Singapore In his closing remarks, Kadish offered a bold suggestion: learn from Singapore, long held as a symbol of fostering economic development, particularly small businesses and services in the financial sector. 'Early-stage startups there pay no tax on their first $250,000 in income,' he said. 'Investors also pay no capital gains tax, provided they invest early. And the government will match private investment rand-for-rand.' Rather than handing out grants with minimal repayment pressure — often abused and never recovered — Kadish proposed co-investment models, tax incentives and tighter public-private partnerships that reward both performance and transparency. South Africa's current grant schemes, by contrast, often suffer from weak repayment enforcement, limited milestone tracking and low auditability. 'Let the government earn upside too,' he argued. 'Let's get creative with how we fund risk.' Shepherding from incubators to ecosystems Patel warned against romanticising incubators or JSE boardroom mentorships as panaceas to the real challenges that those starting businesses really face. 'Executives aren't entrepreneurs,' noted Patel. 'They have different skill sets — and while their advice can be valuable, it's not always informed by the daily triage of early-stage entrepreneurship.' He highlighted initiatives at Regent Business School like the RED (Regent Enterprise Development) Hub, where students blend theory, practice and entrepreneurship into job-making ventures. Projects like biowaste-to-energy converters and automated irrigation rigs are already showing promise. The real ask of regulation: enabling, not overreach If there was one message from both speakers, it was this: the government must enable, not entangle. Patel put it plainly: 'We need electricity. Roads. Data access that's not the most expensive in the world. Regulation that protects, not paralyses.' Kadish agreed, offering a crucial perspective on the importance of basic infrastructure in enabling an environment that facilitates business development, contrasting South Africa with a country in a much more challenging situation. 'Even in Ukraine, under bombardment, the trains run. The lights stay on. Here, it often feels like war just trying to keep your bakery open,' he said. 'We talk about SMEs being critical,' concluded Moodley. 'But until support becomes accessible at scale, it's just talk.' For a country that claims SMEs are the future, South Africa has a long way to go in making that future viable. DM
