Photo: Duane Daws

Photo: Duane Daws

Capital expenditure by major State-owned companies (SoCs) is projected to reach R381.9-billion over the next three years, with investments by Eskom, Transnet and the South African National Roads Agency accounting for 90% this amount.

This projected spend formed part of the R847-billion government expected to spend on infrastructure over the next three years.

In delivering on their infrastructure commitments, SoCs improved their performance, spending R109.9-billion, or 79.9%, of a budgeted R137.6-billion in 2012/13, compared with R92.7-billion, or 70%, of a budgeted R131.7-billion in 2011/12.

“Underspending was mainly the result of contractors not meeting targeted delivery schedules, labour unrest, poor weather, material shortages and engineering delays,” National Treasury outlined in the 2014 Budget Review document on Wednesday.

Eskom and Transnet spent a combined R8-billion over the 2012/13 period, bringing SoCs’ total spend over the last three years to R284.3-billion.

Eskom’s infrastructure figures had been revised downwards over the medium term, however, owing to lower projected revenue.

Infrastructure investments had led to a steady increase in the asset base of SoCs, from R450.1-billion in 2008/09 to R793.9-billion at the end of 2012/13.

The net asset value of State-owned firms also increased to R252.2-billion over the period, with Eskom and Transnet accounting for 77% of this amount.

“However, in 2012/13, these companies’ average return on equity slowed to 4%, down from 7.6% in the prior year, mainly owing to lower earnings and higher operational costs at Eskom,” stated the review.

FUNDING PLANS

Over the next three years, 61.6%, or R235.3-billion, of funding required for infrastructure development by SoCs was expected to be raised in debt markets, with the remainder coming from internally generated cash.

Again, Eskom and Transnet would account for the bulk of these borrowings.

In 2014/15, an estimated 67.3% of borrowing by State-owned enterprises would be sourced in the local market.

“To reduce borrowing costs and ease pressure on the domestic market, State-owned companies are encouraged to pursue funding opportunities with multilateral agencies that offer them favourable funding terms and conditions,” noted Treasury.