The government has approved a policy directive which cracks down on inflated executive bonuses at state-owned enterprises (SOEs) like Eskom and the SABC, according to a report by the Sunday Times.

The directive requires that all future bonuses and incentives be based on income statements rather than balance sheets, meaning that many executives at struggling SOEs could lose their bonuses entirely.

“There have been SOEs in the past where the incentive system is built around the balance sheet, not the income statement, which means when they get a bailout it ists on the balance sheet and then they get big bonuses,” the head of the policy unit in the presidency, Busani Ngcaweni, told the Sunday Times.

“It cannot be that you earn so much in bonuses over time and the only indicator you use to earn maximum [bonuses] has nothing to do with the performance of that institution,” Ngcaweni said.

The policy directive will prevent executives from receiving inflated bonuses due to government bailouts, which is aligned with the aim of the Presidential Review Committee on SOEs.

The review also recommends implementing more stringent criteria for board appointments, requiring candidates to have the relevant qualifications and experience to sit on the board at SOEs.

SOE Meltdown

State-owned enterprises in South Africa are floundering under crushing debt and the effect of years of corruption at the highest level.

Both Eskom and the SABC have received government bailouts to continue functioning, although their economic outlook remains grim.

Earlier this month, political scientist and journalist RW Johnson argued that money handed to Eskom is simply a waste, as it would be used to pay inflated salaries to executives and unnecessary workers, as well as to finance corrupt deals.

He said that Eskom required big job cuts, a purge of corrupt deals, the sale of many assets, and an end to cadre deployment if it ever hoped to recover from its financial problems.

The SABC is not faring any better, with the public broadcaster facing the possibility of a total blackout if it is unable to improve its financial position and pay off its debts.

The company was recently unable to renew licences for PSL football matches, as the rights to broadcast these games costs R280 million over five years, while the SABC would only earn around R9.8 million each year from the broadcasts.

The government has also stated that it cannot give the SABC a blank cheque to solve its problems, and there have been clashes between the SABC board and the Minister of Communications over the public broadcaster’s turnaround strategy.

On multiple occasions, the SABC has said that it needs a loan guarantee from the government to ensure that it remains sustainable, with the alternative being a possible “Day Zero” event, where it would have to shut down all broadcasting.

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