While the government seems to have plans for the PIC to bail out Eskom, Public Investment Corporation CEO Dan Matjila says its current exposure to Eskom is already unsustainable.
He says the PIC, which controls R1.9-trillion of mostly government employees’ pension money, is overexposed to Eskom bonds.
Finance minister Malusi Gigaba said recently the government had not ruled out using the PIC to recapitalise SOEs including Eskom.
Matjila says the PIC intends doing just the opposite.
"If things don’t change for the better we will not increase our exposure and we will allow natural maturity to happen to reduce that exposure, because it is not sustainable."
Matjila concedes that, given the size of its exposure, the PIC should have done more to ensure proper governance at the power utility.
"We’re putting together a report on Eskom so we can understand what are the issues that need sorting out in order for us to roll any bonds that are going to mature."
He concedes that this is something they should have done long ago.
He admits they were not as concerned about governance at SOEs as they should have been because they believed that if things went pear-shaped government guarantees would protect their clients.
Now he is not so sure.
If his clients, notably the Government Employees Pension Fund, decided under government pressure to change the PIC’s mandate to allow additional funds to be put into Eskom and SAA, he would refuse.
"I would not advise them to do that in the current situation," he says, because they would be putting pensioners’ payouts at risk.
He says it is "highly possible" that the government would no longer be in a position to honour its guarantees if the PIC’s investments in SOEs turned sour because of their lack of proper governance.
"We’ve relied too much on buying bonds of SOEs that are guaranteed by government. That has made us too relaxed to drive the right kind of governance."
He says the incentive to insist on good governance at SOEs has not been there.
"The problem is that we are spoilt by these government guarantees."
He says government guarantees are also problematic "in the sense that you’re depriving the nation of access to money because the balance sheet of the nation is guaranteeing SOEs".
"It is money that is trapped, that is supposed to be going into service delivery and other things," he says.
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