PIC, pension fund lend Eskom R5bn
After strenuous denials of the intention by the finance minister in 2017, the Public Investment Corporation (PIC) and the Government Employees Pension Fund (GEPF) have agreed to extend a R5bn bridging loan facility to cash-strapped Eskom to keep it afloat for a month. In September 2017, Finance Minister Malusi Gigaba strenuously denied that the PIC would be forced to extend loans to Eskom, saying there were “no dirty fingers” clamouring for the GEPF’s money to save Eskom.
After strenuous denials regarding an Eskom bail-out by the finance minister last year, the Public Investment Corporation (PIC) and the Government Employees Pension Fund (GEPF) have agreed to extend a R5bn bridging loan to cashstrapped Eskom.
In September, Finance Minister Malusi Gigaba denied the PIC would be forced to extend loans to Eskom, saying there were “no dirty fingers” clamouring for the GEPF’s money in order to save Eskom.
This is the first cash injection Eskom has received since July 2017, when the utility’s major lenders closed their taps to Eskom in the face of mounting corruption allegations and a corporate governance meltdown.
The loan will fund the company’s operations during this month, including paying salaries and suppliers, the PIC and GEPF said in a joint statement on Monday. The GEPF, which manages the pensions of public servants, is one of Eskom’s largest bond investors with about R90bn invested with the junk-rated utility. Eskom hopes this new loan will spur other funders to open their taps.
The PIC’s investment mandate precludes it from investing in entities that are rated junk.
In advancing the loan, the PIC and the GEPF said they were encouraged by the new board at Eskom, under the leadership of chairman Jabu Mabuza and the management team led by newly appointed acting group CEO Phakamani Hadebe.
Hadebe and the board were appointed last month to arrest the governance meltdown and rampant corruption that cost the utility its going-concern status.
Major funders declined to advance fresh loans to Eskom, demanding the utility first deal with allegations of corruption against its leadership team. The new board immediately swung into action, firing or forcing out up to six senior managers and executives within a week of its appointment, including chief financial officer Anoj Singh.
In November, Eskom was forced to admit it would run out of money to meet its current liabilities, including paying suppli- ers and the wages of 47,000 staff members by December. It then raised a R3.5bn loan in December to keep going.
“We needed the money because our coffers were severely depleted,” said Eskom spokesman Khulu Phasiwe.
The utility’s accounts show it had R8.5bn in cash in September, down from R30.3bn the previous year.
The Public Service Association (PSA) said the Eskom “bailout” was a betrayal by the GEPF and PIC boards, which guaranteed unions they would hold off on any financial assistance to parastatals until corporate governance had improved.
GM Ivan Fredericks said the union was consulting its attorneys on Monday evening to see if the PIC board could be declared illegal.
This is after the PSA flagged in 2017 that the finance minister was not acting in line with the PIC Act by not consulting members of the GEPF when making appointments to the board of the investment corporation.
The union was also considering whether to continue its threat of litigation against Gigaba following his failure to adhere to his own deadline for meeting with public sector unions in January to tackle their concerns.
“Our attempts to reason with the finance minister, the GEPF and PIC boards have come to naught. This R5bn unconsulted illegal transaction will be met with necessary consequences for GEPF and PIC,” Fredericks said.
The unions had been on guard since Gigaba told the Cosatu central executive committee meeting in August that should the need arise, Treasury would dip into PIC funds to rescue struggling parastatals.
Several interventions were also undertaken by the unions, including a submission to Parliament that led to the drafting of a Private Members’ Bill to strengthen good governance and transparency at the PIC.
Cosatu spokesman Sizwe Pamla told Business Day that, while the federation had reservations about the state of parastatals, they could not reject the PIC’s intervention as the role of Eskom in the economy was critical. He added that the recent changes at Eskom warranted their support.
“We cannot just be inwardlooking and fail to appreciate the changes that we called for.”
The DA said it wanted the terms of the loan agreement released as it “enhanced risk on pension funds”.
The PIC bail-out comes on a day when the EFF cast aspersions on the newly appointed Eskom board.
EFF leader Julius Malema questioned the appointment of several members of the board, including former MTN CEO Sifiso Dabengwa, who Malema claimed was a close friend of Deputy President Cyril Ramaphosa.
“The recent board of Eskom has people who should be closely monitored … Sifiso Dabengwa is a problem because of the proximity to Ramaphosa — and it is not correct that the first appointments [since Ramaphosa became ANC president] should be so close to him," Malema said.