South Africa’s state-owned logistics utility, Transnet, will inevitably get a further bailout from government on top of the R47 billion pledged by the National Treasury in December last year.
This is the view of Bank of America senior economist Tatonga Rusike, who says that government support for Eskom and Transnet, and a permanent social relief of distress grant, are major fiscal risks.
Rusike contends that Transnet is too important for the government to let it fail.
The government’s debt burden is steadily growing, with Treasury forecasting that, at the end of 2023, gross debt as a percentage of Gross Domestic Product would peak at 77.7% in 2025/26 – up from a forecast of 73.6% in February last year.
Much of this growth is expected to come from the government taking on more and more debt already incurred by the country’s state-owned enterprises.
Last year the National Treasury announced a plan to take on R254bn of Eskom’s debt and R47bn of Transnet’s.
“Government does not want Transnet to default and, like Eskom, it is too big to fail,” he said.
Rusike’s comments echo one of the largest debt investors, Stanlib, which warned, after the Medium Term Budget Speech last year, that taxpayers would bail out SOEs again.
Source: Daily Investor
