Cosatu calls for Eskom rescue proposals
• Mounting union disquiet about using R250bn of pension money to pay down utility’s liabilities
Labour federation Cosatu has called on workers and South Africans in general to submit proposals for solving Eskom’s debt problem, to be discussed by its central executive committee. The call for submissions comes after Cosatu leaders tabled a plan at a meeting with President Cyril Ramaphosa and business leaders for R250bn of pension money managed by the Public Investment Corporation be used to pay Eskom’s debt.
Labour federation Cosatu has called on workers and South Africans in general to submit proposals for solving the Eskom debt problem, to be discussed by its central executive committee later in February.
The call on Wednesday for submissions came after Cosatu leaders tabled a plan at a meeting with President Cyril Ramaphosa and business leaders last Monday, which recommended using R250bn of pension money managed by the Public Investment Corporation (PIC) to pay down Eskom debt.
Since the talks began, there has been mounting disquiet in the ranks of organised labour with some Cosatu union members expressing concern about the security of their pensions.
Union federation Fedusa also said it objected to the use of pension money to bail out Eskom, as did union Solidarity, which said on Wednesday that it would take legal action to stop it should the PIC and the Government Employees Pension Fund (GEPF) agree to it.
Earlier this week, Cosatu put the brakes on the process to allow more consultation with workers before an agreement is reached with the government and business. Labour leaders had hoped a social compact could be reached that could be announced by Ramaphosa in the state of the nation address on Thursday.
“The Eskom debt crisis represents a very serious threat to our economy and country.
Every South African agrees with this. Cosatu has offered a proposal on how to address this problem, for consideration by workers and South Africans at large,” it said in a statement.
“There are many who are supportive of our proposal. There are also many who are critical of it. We have said explicitly that we will welcome and consider any alternative proposals, which are better than we have offered.”
Alternative submissions would be discussed at Cosatu’s coming central executive meeting, said parliamentary coordinator Matthew Parks. The proposal has caused anxiety in the business and investor community, which fear that it will, if implemented, open the door to prescribed assets and undermine governance of the financial sector.
The mechanism of prescribed assets, which was used by the apartheid government to raise funds for the state, entails pension funds investing a minimum amount in government debt. Most analysts believe that this leads to poor returns and an inefficient allocation of savings in the economy. The proposal tabled last week was endorsed by the Cosatu central executive committee in November.
The policy of prescribed assets, which the proposal also endorses, is a standing policy of Cosatu, endorsed by many successive congresses.
The original Cosatu proposal had suggested that the investment in Eskom debt by the GEPF would not realise a return for the fund, as it would be converted into equity. In return, Cosatu hoped to secure a commitment from the government that Eskom will not be privatised and that no workers will lose jobs.
The federation argued that pensioners would not lose out in the process as the GEPF is a defined benefit fund, with benefits guaranteed by the government.
It is also not the case that pensioners would not lose out if the GEPF were to fall short of being able to meet its liabilities as, according to its rules, it is permissible to give under-inflation annual increases, of up to 75% of the rate of inflation, when the trustees believe it to be justified. Over a long period, this can significantly erode the value of benefits paid to pensioners.