KZN Treasury tells failing SOEs: there is nothing developmental about funding failure

KwaZulu-Natal Finance MEC Francois Rodgers has told young entrepreneurs that business success rests on hard work, integrity and sound financial management, and used the same engagement to warn that continued bailouts of failing State-owned enterprises pull money away from schools, clinics, roads and water infrastructure.

Rodgers was speaking at an engagement with youth in business held in partnership with the South African Institute of Professional Accountants (SAIPA) and Standard Bank, according to SAnews (South African Government News Agency), whose report is the source for this account.

“It takes courage to build a business. You must work hard in order to create businesses, generate income and opportunities for other young people,” Rodgers said.

He encouraged young people to uphold integrity in their business dealings, stressing that ethical conduct is central to lasting success. He also set out plainly what his department does and does not do: the provincial Treasury does not directly fund entrepreneurs, but remains available to assist with financial management guidance. Young business owners, he said, should strengthen their financial management knowledge to run sustainable enterprises.

On the public purse, Rodgers said South Africa does not lack policies, commissions or turnaround plans for State-owned enterprises. What it needs, he said, is the political will and institutional discipline to implement meaningful reforms, with the focus shifting from diagnosing problems to delivering practical solutions.

State ownership, in his account, must serve a clear public purpose such as providing electricity, transporting people and goods, delivering water, developing infrastructure and supporting economic growth. SOEs should be judged on whether they fulfil their mandates, deliver services effectively, remain financially sustainable and uphold ethical governance.

“If the answer is repeatedly no, government has an obligation to act. There is nothing developmental about continuously funding failure,” he said.

He warned that continued bailouts place pressure on public finances and divert resources that could otherwise support schools, clinics, roads and water infrastructure. Government support may bring temporary relief, he said, but it cannot substitute for structural reform.

“Public financial support cannot be a blank cheque. Assistance should be conditional, transparent, time-bound and linked to measurable reform. Accountability must follow authority,” Rodgers said.

“Boards cannot claim authority when decisions succeed but blame government when they fail. Executives cannot be rewarded while their institutions fail to deliver. Shareholder departments cannot appoint boards and then distance themselves from poor governance.”

He called for board appointments that are transparent and based on competence, and for political interference in procurement, appointments and commercial decisions to be avoided. He also called for early-warning systems to identify financial and operational problems before they escalate into crises, and for decisive action on recurring audit findings.

Solutions, he said, must be tailored to individual SOEs and should include improved governance, restructuring, consolidation, strategic partnerships and partial private sector participation.

“Where an enterprise has no sustainable mandate, credible recovery path or defensible public purpose, government must be prepared to consider closure. We do not have unlimited fiscal resources to sustain permanent non-viability,” he said.

On his own department’s role, Rodgers said the provincial Treasury’s responsibility is to protect the fiscus, and that it should not simply be the institution that says no.

“We must ask whether a proposal is affordable, lawful, implementable, and capable of delivering value,” he said.

He tied public confidence to reliable services, well-maintained infrastructure, competent appointments and accountability for the use of public funds.

“Our objective should not simply be to preserve State-owned enterprises. It must be to make them worthy of public ownership.”

The SAnews report does not name which enterprises Rodgers was referring to, does not set out a timetable or list of entities earmarked for restructuring or closure, and does not record any response from SOE boards or from the national government, which holds the shareholder role for the major entities. It is a summary of the MEC’s remarks rather than a transcript or a policy document.

Source: SAnews (South African Government News Agency), https://www.sanews.gov.za/south-africa/rodgers-urges-young-entrepreneurs-build-businesses-integrity