A Cosatu proposal to use R250bn of pension money managed by the Public Investment Corporation (PIC) to pay down Eskom’s debt in return for a range of undertakings by the government was under urgent and serious discussion at a high-level meeting at Nedlac on Wednesday afternoon.
Conditions of the deal would include that no worker at Eskom would lose their job and that Eskom would not be privatised.
President Cyril Ramaphosa, who has been briefed on the proposal several times, most recently on Monday at his monthly meeting with business and labour, has been strongly enthusiastic of the idea. His support led to Wednesday’s urgent meeting, at which Cosatu was seeking to emerge with an in-principle commitment for the idea from social partners.
Cosatu hopes broad support for a social compact on Eskom will be included in Ramaphosa’s state of the nation speech next week.
This week, public enterprises minister Pravin Gordhan also spoke positively of the Cosatu proposal, telling an audience in Cape Town on Tuesday that “over the next month or two we are going to see fascinating exchanges helping to get all the resources available in the country” to save Eskom, according to a Moneyweb report.
The principle of using employee savings, chiefly those of the Government Employees Pension Fund, to bail out troubled state-owned enterprises is controversial and has previously been rejected by Cosatu.
However, Cosatu’s parliamentary officer, Matthew Parks, said in this instance the motivation lies in the economic importance of saving Eskom.
If Eskom failed, all 12-million jobs in the formal economy would be at risk, Parks said in an interview on Tuesday.
In 2019, Cosatu mobilised R1.3bn of the Unemployment Insurance Fund (UIF) managed by the PIC to assist in the rescue of troubled retailer Edcon.
The Eskom “rescue” is seen by the union federation as a similar idea, on a far bigger scale. In the Eskom case, the suggestion is that about 7% of the R2.2-trillion managed by the PIC, together with contributions from the Industrial Development Corporation and Development Bank of Southern Africa, be invested in a special purpose vehicle that would take over R250bn of Eskom’s debt.
Cosatu stressed that the bailout “is not a blank cheque and is tied to a number of conditions”. These include: a comprehensive and public audit of all Eskom contracts and expenditure, including coal contracts; the arrest of those who looted and their assets seized; those who mismanaged must be dismissed and held personally liable; coal contractors and independent power producers must reduce their prices; and Eskom must be licensed to expand into renewable energy.
Cosatu also wants Eskom to clamp down on the failure of consumers to pay and wants every household to run on a prepaid meter.
Municipalities that owe Eskom must have their debts paid over by the Treasury out of budget allocations.
After Monday’s meeting, Ramaphosa’s spokesperson Khusela Diko said the president "was favourably disposed" to the proposal, which was now under discussion by the government’s social partners. Diko said that Ramaphosa had also emphasised that the mandates or fiduciary duties of the PIC and other institutions should not be undermined.
The use of PIC money would need to be supported by a credible business case and geared towards delivering sustainable returns for its clients, she said.
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