NEWS & ANALYSIS

R59bn bailout to SOEs would induce ratings downgrade - Alf Lees

DA MP says Eskom debt and govt guarantees also expected to increase to R600bn over next three years

Planned R59 billion bailout to SOEs will worsen debt levels and impact ratings

Reports of a proposed bailout for parastatals by cabinet, especially the South African National Roads Agency (SANRAL), will worsen the country’s precarious debt levels and negatively impact South Africa’s national sovereign ratings.

Cabinet’s argument that a SANRAL default will affect sovereign ratings is flawed because a government guarantee of R59 billion will increase the state’s debt liabilities to 60% of GDP, which is sure to induce a sovereign credit downgrade.

It is somewhat surprising that the report seems to ignore the other elephant in the room - the contingent liability in the form of Eskom debt and government guarantees that, according to the Eskom corporate plan, will increase from R 235 billion To R 600 billion over the next three years.

I will write to the Chair of the Standing Committee on Finance (SCOF), Yunus Carrim, to request that the Fiscal Liability Committee and the Asset and Liability Management Unit of the National Treasury be called urgently to  come and address the SCOF on the full extent of sovereign liabilities, contingent liabilities and current applications for government guarantees and cash bailouts.

Statement issued by Alf Lees MP, DA Shadow Deputy Minister of Finance, 12 August 2018