The Government Employees Pension Fund (GEPF) has not taken a decision to convert its Eskom bond holdings into shares in the company, principal executive officer Abel Sithole said on Thursday.
The GEPF is the biggest pension fund in SA with R1.8-trillion in assets under management, mostly managed by the Public Investment Corporation (PIC), the government’s asset manager.
On Thursday, PIC chair Reuel Khoza said in an interview with eNCA that the PIC had submitted a proposal to the fund to convert Eskom bonds held by the GEPF into equity in Eskom. This would have the effect of reducing Eskom’s debt servicing costs substantially.
“We have submitted a proposal which we believe will go a long way to getting Eskom out of the financial doldrums. Jointly the PIC and GEPF have just under R100bn of bonds and if we could discuss with them and they met certain requirements, it would be possible to convert those bonds to equity. Then the interest that Eskom pays would be virtually halved,” he said.
However, such a proposal would need the approval of the GEPF board before it could go ahead. Sithole was on Wednesday appointed as the new CEO of the PIC, where he will soon take up his position.
He said in response to Khoza’s comments that “the PIC is mandated by the GEPF to investigate and assess any investment proposal, including options with regard to the bonds and bills of Eskom that the GEPF is invested in, in the best interests of the fund. When the PIC investigates, assesses and discusses such investment proposals, including with the GEPF, it does not amount to the GEPF’s support and/or approval thereof until the GEPF board makes a specific resolution.”
There has been an ongoing row over political pressure on the PIC to invest in government entities, most of which are loss-making. Eskom, in particular, is in deep financial distress and is unable to service its R400bn debt burden from revenue. It has become dependent for survival on support from the Treasury. An equity stake in Eskom would be unable to provide a return to investors.
Pension fund holders and several large public sector trade unions have voiced strong opposition to the use of pension money to prop up state-owned enterprises.
However, union federation Cosatu proposed in January that the PIC provide financial support to Eskom in the broader interests of preventing its collapse.
After much discussion at the National Economic Development and Labour Council (Nedlac) with government and business, a social compact was drafted proposing that all parties commit to mobilise funds, including private savings, for Eskom. But the compact, which is not yet final, stopped short of proposing a vehicle for how this could be done or setting a target amount.
DA shadow finance minister Geordin Hill-Lewis said that “the idea of converting PIC-held Eskom debt into an ‘equity’ stake is just a euphemism for writing off this debt. The PIC would have no hope of recouping the money, since the government cannot afford to buy this equity from them, and Eskom is not making any money to pay the PIC a return on investment.”
Hill-Lewis said that Khoza should retract or clarify his comments.
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