The Democratic Alliance (DA) in Limpopo is deeply concerned by the sustainability and consistent underperformance of the Province’s State Owned Entities (SOE). This bleak synopsis of SOE’s is contained in a Limpopo Legislature report on the financial status and sustainability of State Owned Entities in Limpopo.
The report aimed to determine whether the Limpopo provincial entities were delivering on their mandate of economic growth and enterprise development, whether revenue collection was commensurate to human resource salaries and if the entities were managing their own finances adequately.
In Limpopo the five SOE’s, Limpopo Economic Development Agency (LEDA), Limpopo Gambling Board (LGB) Limpopo Tourism Agency (LTA) Gateway Airport Authority Limited (GAAL and Road Agency Limpopo (RAL) were primarily established for the purpose of driving the provincial economy and development. The report outlines that most of these SOE’s have been running at a loss and rely on government grants for survival and this has had a negative impact of the economic growth and development of Limpopo.
LEDA is a schedule 3D entity that should be self-sufficient but is at the centre of the failure of SOE’s to be sustainable. It has numerous subsidiaries and joint ventures such as Great North Transport (GNT), Corridor Mining Resources (CMR), Limpopo Connexion, Risima Housing Corporation and most of these are serial underperformers or on the brink of collapse.
Currently (March2021) LEDA only has a debt collection rate of 12%, while CMR, New Era and GNT have achieved a 0%, -4.6% and –26% Return on Investment respectively. CMR has a -1011% Net Profit percentage, New Era has a -51.5% Net Profit percentage while GNT has -R106.6 million net profit. LEDA has been plagued by a lack of adequate oversight over the entity and poor financial management and controls.
GAAL is also expected to generate its own revenue as a schedule 3D entity but has failed to do so and has become dependent on government to keep afloat. The report outlines that the Auditor General stated the entity had cash flow challenges due to high debtor impairments and highlighted the reliance on equitable share when GAAL should be self-sustainable.
RAL which is mandated to oversee the delivery of roads in the province has also underperformed and been a colossal failure in fulfilling its mandate. In 2018/19 financial year its expenditure (R2.25 billion) exceeded revenue (R1.417 billion) resulting in a deficit of R832.7 million and irregular expenditure of R944.7 million. The reports highlights RAL as a financial liability and risk to the provincial fiscus.
It is clear that the Limpopo SOE’s are not sustainable in their current configuration, many are largely failing to meet their mandates as well as manage their own finances adequately and have ineffective boards. The consistent bailing out of entities like RAL, GAAL, CMR and GNT that continue to underperform is detrimental and simply an unacceptable use of funds meant to develop the province and provide services.
The DA believes it is time Premier Chupu Mathabatha and the Limpopo Provincial Government takes a decision to stop bankrolling failed SOEs, and consider restructuring or other alternatives such as public private partnerships, closure of failing entities/subsidiaries and the dissolution of ineffective boards in order to have profitable, self-sufficient entities that contribute to the province’s economic growth and development.