A bailout by any other name… Taxpayers to foot the Eskom bill again

The Congress of South African Trade Unions’ (Cosatu) proposal to rescue Eskom using government pensions is simply a government bailout in disguise, as eventually taxpayers would be the ones bearing the brunt should Eskom fail to right the ship.

Cosatu proposed to cut the power utility’s R450 billion debt by R250 billion, by getting aid from the Industrial Development Corporation (IDC), the Development Bank of Southern Africa, and the Public Investment Corporation (PIC). This would be done through the establishment of a special purpose finance vehicle, and could also prevent potential job losses at the power utility, the federation said.

Cosatu presented this proposal last week at the National Economic Development and Labour Council (Nedlac) which was welcomed by government and business leaders. The federation also listed 26 conditions in exchange for the financial backing.

The PIC manages over R2 trillion in investment including their biggest client the Government Employees Pension Fund (GEPF).

President Cyril Ramaphosa was reported to have responded to the proposal by saying there needed to be discussions on how financial institutions invest their money but that attempts to save Eskom should not undermine the investment mandate or fiduciary duties of the PIC, the IDC and the Development Bank.

Cosatu had last week said that government had accepted their proposal and details on how the intervention would pan out were still being sketched.

Should the PIC and in turn the GEPF come on board to rescue the power utility, and they under-perform in terms of financial return, taxpayer money would have to be used to reimburse the pension funds.

Government employees have no need to fear though, as pensions would remain safe, chairperson of Intellidex Stuart Theobald told The Citizen. Taxpayers, on the other hand, should be concerned.

“The PIC is the fund manager of the GEPF. The GEPF is the pre-paid fund that allows government to meet its obligation to pensioners. If the GEPF underperforms in terms of financial returns, the pensioner is not affected in terms of the benefit because the government guarantees these benefits.

But it was government that would have to make up for the shortfall, therefore placing the taxpayer on the hook, Theobald explained.

“The fund holds assets to meet estimates of future liabilities. These estimates are done by actuaries, and the government has to pay into the fund, if the amount in the fund is not sufficient to meet the actuarial liabilities. Any payment that government makes is coming from its general revenue fund, which is the money it collects from taxpayers.”

The GEPF’s mandate to the PIC, which is their service provider, was not to authorise investments into state owned entities such as Eskom.

“They [PIC] are mandated to prudently invest the funds,” said Theobald.

The GEPF however assured its members, pensioners and beneficiaries on Friday that they had not received such a proposal from Cosatu nor was it consulted.

“If the GEPF is approached with a proposal that requires investing in Eskom, such a proposal will be considered on its merits in the best interest of members, pensioners and beneficiaries,” said the fund in a statement.

rorisangk@citizen.co.za

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