The Financial Performance and Macrofinancial Implications of Large State-Owned Enterprises in Sub-Saharan Africa

IMF Working Papers, March 18, 2022

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Using a newly-compiled dataset of state-owned enterprises (SOEs) in Sub-Saharan Africa, the study presents aggregate information about profitability, liquidity and leverage.
40 percent of the close to 300 surveyed SOEs are unprofitable.
Larger firms also tend to be illiquid and overleveraged.
Cross-sectional regressions find that SOE debt stock sustainability is impacted by firms’ profitability and liquidity.
Macroeconomic factors cannot be shown to matter for SOE debt stock sustainability, except for some governance variables.
Weak SOE performance may have a macrofinancial impact affecting bank soundness through delinquent loan exposures.

Subject: Arrears, Asset and liability management, Debt sustainability, Economic sectors, External debt, Financial statements, Liquidity management, Public enterprises, Public financial management (PFM)
Keywords: Arrears, Debt sustainability, Financial statements, Firm Performance, firms' profitability, leverage Ratio, Liquidity management, Public enterprises, SOE debt stock sustainability, SOE debt sustainability, SOE performance, State-Owned Enterprises, Sub-Saharan Africa

Profitability and liquidity at the firm level are key determinants of SOE debt sustainability in the sample.
Governance variables show some measurable relationship with debt sustainability, whereas broad macroeconomic variables do not in the reported regressions.
The combination of unprofitability, illiquidity, and overleverage among larger SOEs implies potential spillovers to the banking sector via delinquent loan exposures.

IMF Working Paper by Torsten Wezel and Naly Carvalho (Working Paper No. 2022/056, March 18, 2022).