The ANC must not risk workers’ pensions
In its discussion paper entitled “Reconstruction, Growth and Transformation: Towards A New, Inclusive Economy”, the ANC proposed a radically inward looking approach towards an inclusive economy.
Quite amazing after 26 years of democracy, the ruling party is still talking of an inclusive economy.
The ANC has performed dismally in reducing inequality in all its dimensions in the democratic SA.
The outbreak of the novel coronavirus has exposed the sad disparity in the vulnerability of the poor and largely black majority as compared to the comfortably rich and largely white minority.
Despite massive investment in social transfers over the years, the government has failed to cushion the vulnerable from economic shocks, a lesson it should have learnt from the 2008 global recession.
Repeated expenditure on unrewarding and time-inconsistent polices with a poor economic multiplier and an unsatisfactory social impact has worsened the fiscal position of the economy.
Fiscal debt is expected to balloon to 80% of GDP by end of 2020. The failure over the years of the South African economy to build a solid domestic constituency of financial investors in the domestic financial market has led it to accumulate huge amounts of debt with foreign lenders.
Confronted with dwindling potential lenders and stringent conditions that border on sovereignty risk being offered by the lenders, the ANC has proposed for the economy to start searching domestically for funds. It has suggested the use of pension funds to bail out SOEs, Eskom in particular.
In the discussion document, the ruling party recommended that pension funds should buy some of Eskom’s assets.
The party is prepared to alter Section 28 of the Pension Funds Act which prescribes the extent to which retirement funds may invest in particular asset classes.
The ANC is likely to find minimum resistance from labour in its attempt to relax the act.
Cosatu has already voiced its support for use of pension funds to bail out Eskom even though one of its major affiliates, Sadtu, has called for more caution to the process.
Cosatu might find itself in a huge internal conflict if it does not handle the situation delicately. It has a mammoth task to balance between saving jobs at Eskom and overcoming the insecurities of its affiliates representing workers from other sectors of the economy.
There will definitely be an intense confrontation in parliament between the ANC and opposition parties.
The DA long declared that it is ready to take the use of pension funds on Eskom to the Constitutional Court and has described the initiative as “irrational and immoral”.
The EFF has in the past rejected the initiative, citing corruption and misgovernance risk in SOEs.
The Eskom situation is quite tricky. SOEs are a huge fiscal and operational risk to the South African economy.
Eskom literally steamrolls the economy as the dominant energy producer and distributor. Its collapse will send the economy tumbling.
Pension fund stakeholders have two options; its either they allow Eskom to collapse and let it go down with the economy, wiping off their pensions in the process or they take the gamble, inject money into Eskom in an attempt to save it and the economy.
Either way, Eskom remains a huge gamble to invest pensioners’ life savings. Eskom has been paralysed by instability at top management level.
It has had 11 CEOs in the past 10 years, in the same decade its debt ballooned from R50bn to R450bn.
At one time in 2019, Jabu Mabuza was acting both as CEO and board chair.
A gross transgression of the King IV code of corporate governance which SOEs are required to follow.
There has been a disreputable collapse of governance at Eskom which has made accountability virtually impossible.
Annual financial statements of Eskom were at one time in 2017 delayed and missed deadline.
All this does not spell a fertile environment to invest the life savings of workers which they have toiled for all their working years.
Eskom reported a net loss after tax of R20.7bn for the 2019 financial year. Such uninviting financial performance will not be overturned overnight. There will be further losses and there is no guarantee they will get lesser, they actually stand to get bigger.
There is yet to be a clear plan to stabilise the financial position and the financial performance of Eskom.
Workers deserve the best return on investment on their pension funds as a token for their dedication to the South African nation, not a gamble on a poorly run, unstable and offtrack SOE.
Eskom remains the government’s liability, the rot that Eskom has seen is of the government’s making.
The ANC has no ground to disown a problem that has developed under its watch.
How dare it risk the hardearned pensions of hardworking South Africans to rescue the mismanagement of government in SOEs.
The party should look somewhere else, privatisation if it has to, to resuscitate the financial and operational position of Eskom.
The delicacy of the pension funds calls for serious deliberations and extensive consultations before amending Section 28.
The ANC through the government will have to put workers into its confidence that risk will be kept at minimum.
If things are to go left, the loss of pensions will horribly vibrate across South African society, causing unforeseen social damage and irreparable harm to the economy.
It is imperative that this issue be afforded the transparency it deserves to allow workers to have a full understanding of what they are getting themselves into, if they agree to be party.
There has been a disreputable collapse of governance at Eskom which has made accountability virtually impossible