South Africa Says State Companies Must Fund Expansion Projects

South Africa’s National Treasury cut its spending budget for new infrastructure projects and said state-owned companies will have to finance their own expansion plans instead of relying on the government.

State companies must take the lead in implementing an estimated 3.6 trillion rand ($367 billion) of projects in new energy, transport, water, housing and telecommunications by 2023, the Treasury said in its mid-term budget report released in Cape Town today. Power utility Eskom Holdings SOC Ltd. and national oil company PetroSA are among those to warn that they may face funding gaps.

“State corporations are expected to borrow on the strength of their balance sheets, rather than being funded” by the state, the Treasury said. “Where capitalization of core public assets may be required, other measures such as upfront disposal of non-core assets will be considered.”

The mid-term budget allocated 84.3 billion rand for communication, energy and transportation projects in the year through March 2014, down from 88.6 billion rand in the February budget. The allocation was reduced to 94.1 billion rand from 97 billion rand in fiscal 2015, and to 102.7 billion rand from 105.6 billion rand the year after that.

Additional funds will be made available to the Passenger Rail Agency of South Africa to buy 300 new trains over the next decade, the Treasury said, without providing details.

To contact the reporters on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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