Pension-fund bailout for Eskom?

A Non Blonde

Senior Member
Joined
Nov 1, 2009
Messages
588
“My view is not to force pension funds but make sure you can make it attractive for them to invest.”

Colour me stupid but I fail to see any attractiveness?
 

CuppaJoe

Senior Member
Joined
Jun 4, 2014
Messages
532
I am always wondering what these articles have to do with Broadband, but I guess the link is:

Eskom >> Electricity >> Telkom >> Broadband.
 

Grant

Honorary Master
Joined
Mar 27, 2007
Messages
46,279
The ANC has said retirement savings may be the answer to the state-owned power utility's woes.
yea, the retirement savings and bonuses of eskom execs and members of parliament.

easier solution - collect outstanding amounts owed
but no, that would be politically "unpopular"

hell - soweto alone, owes the country an entire power station
 

Necuno

Court Jester
Joined
Sep 27, 2005
Messages
58,567
yea, the retirement savings and bonuses of eskom execs and members of parliament.

easier solution - collect outstanding amounts owed
but no, that would be politically "unpopular"

hell - soweto alone, owes the country an entire power station
All we need is: The iron lady.
 

Milano

Honorary Master
Joined
Feb 7, 2004
Messages
12,064
Every day a different bird brain idea. Connect e-tolls to licences... Sell government's share in Vodacom... Sell Eskom assets... Make Eskom attractive to investors...

The wheels of government move so slowly or not at all. When they do move, the speed is pedestrian, the projects are fraught with mismanagement, corruption, nepotism, misguided policies, maladministration. Then when all has failed, whites are blamed. And so the pattern repeats. No lessons learned.

It is a never-ending pit of incompetence and malfeasance, guaranteed to achieve little, nothing, or else actually incur massive losses/debt.

RIP SA
 

Necuno

Court Jester
Joined
Sep 27, 2005
Messages
58,567
Did the article get deleted?
not for a sith
http://webcache.googleusercontent.com/search?q=cache:http://mg.co.za/article/2015-05-21-pension-fund-bailout-for-eskom

The ANC has said retirement savings may be the answer to the state-owned power utility's woes.


If fixing Eskom is proving difficult, finding the cash to keep it afloat is perhaps harder. But the answer to its financial problems could lie in South Africa’s R3-trillion retirement industry, an option the ruling party has been chewing on since last year.

Eskom’s funding gap was last estimated at R225-billion, and growing, caused by runaway costs, continued delays at the power stations Medupi and Kusile, and a hefty diesel bill to run back-up generators.
ADVERTISING

South Africa’s pension industry, one of the largest in the world, could provide the funding the utility is looking for.

In October last year, Finance Minister Nhlanhla Nene said a cash injection of more than R20-billion would be provided to the ailing utility from the sale of nonstrategic state assets – and the first of three tranches would be paid next month. It’s widely expected the government will sell some of its 13.9% stake in Vodacom, which is worth nearly R30-billion.
ADVERTISING

But, according to the head of the ANC’s economic transformation cluster, Enoch Godongwana, it is a short-term fix, only papering over cracks that run so deeply through the troubled utility that much more is needed to sustain Eskom and put it in a position to expand.

Pension funds
“What we said about it at our discussion at the lekgotla last year is that we must explore the possibility of pension funds investing in Eskom,” he said. The discussion was not about privatisation but about the restructuring of funding of Eskom.

“Someone is going to say: ‘Don’t sell equity; let it be debt or bonds.’ But they [Eskom] are already doing it. That won’t be something new.

“What Eskom needs at the moment is cash, not debt or bonds. From where we sit, there is money out there to be utilised,” he said.

“My view is not to force pension funds but make sure you can make it attractive for them to invest.”

He said he was not talking only about state employee pension funds, but “all kinds”.

In response to a suggestion that Eskom was not an attractive investment, he replied: “That has not been tested, so no one can say.”

In 2010, Eskom sought a private equity partner for Kusile, but none materialised. But a direct stake is not the only option.

“It may well be Eskom may say: ‘No, we are not going to sell stakes in Eskom.’ Then it could be that they securitise some of the income from some of the power stations,” Godongwana said. “The funds might put money into Eskom and it would be agreed that all income from that power station would be owned by the pension funds.

“Government should have looked at this proposal and said, ‘Look, you guys are dreaming,’ or say ‘No, we have found a better formula.’ But that is yet to happen,” he said.

Referring to ANC secretary general Gwede Mantashe’s recent comments that a Chinese model, in which a para*statal is capitalised by listing part of it, could be used, Godongwana said: “Some people have said the secretary general contradicted me, but a closer reading of what he has said shows it’s a different interpretation of the same thing … He is talking about a partially listed entity without losing strategic control.”

Government employees have little to lose if their pension funds are invested in Eskom because their retirement benefits are guaranteed by the government.

Danny Adonis, the general manager of the Public Servants’ Association of South Africa, said 90% of the union’s members worked for the government and had their pensions in the Government Employee Pension Fund (GEPF), the largest pension fund in Africa, with more than R1-trillion in assets under management. It is a defined benefit scheme, and pensioners can expect a fixed return, regardless of how its investments perform.

Guarantees
“Government guarantees the pension,” Adonis said. “The benefit of the member is set; there is a specific calculation. Money in GEPF is channelled to the Public Investment Corporation [PIC] to grow it. But treasury guarantees everyone who is member that it will pay that person’s pension. If investments go belly up, the guarantee kicks in.”

Grové Steyn, an infrastructure and regulatory economist at Meridian Economics, said determining the value of a utility such as Eskom had nothing to do with the cost of constructing or procuring its assets, but rather with its ability to produce positive earnings down the line from selling electricity or some of its assets.

But there were also the issues of time value and discounting – an investor had to factor in the future value of revenues and weigh it up against what the money was worth today, and what it could be worth if it was invested elsewhere and earned compound returns.

“The worth of an asset today is the sum of its future revenues discounted to the present time,” he said.

The rate of return that Eskom offered would be key in getting people to invest in it.

“I can put it elsewhere, in the stock exchange, for example, and earn 10% or 12% or more. If I am going to buy into Eskom, I need to earn the same … If it’s more risky, I would need to earn more.

“The regulator is not prepared to give Eskom what it needs to cover its costs. And Eskom does not have control over its costs, and is set to spend more in years to come, which means that future net revenues are not going to look too good,” he said.

In light of Eskom’s mounting liabilities, stagnant electricity demand and soaring tariffs, “you will be asking investors to buy something on the brink of a huge financial crisis”, Steyn said. “The outcome will be very uncertain, to say the least.”

If the PIC was compelled to invest directly into Eskom under these circumstances, it would have the effect of “nationalising employees’ private savings”.

Hiding costs
Securitising the revenue from some power stations would be the equivalent of providing government guarantees for Eskom’s debt, said Steyn.

“It’s just a fancy way to get some very expensive cash from the capital market while hiding some of the true costs thereof. By reducing the risks to equity providers, this will reduce their incentive to fix the underlying problem – Eskom’s costs.”

He added that, even if Medupi, Kusile and Ingula were removed from the equation, Eskom would still have severe problems, but it would be a viable enterprise.

In reply to the Mail & Guardian‘s questions, the PIC said it was aware of discussions about the possible sale of Eskom and suggestions that part of Eskom should be sold to pension funds, including the PIC.

“The PIC will not be expressing any opinion on these discussions because they are within the purview of policymakers,” it said.

“However, it is useful to point out that the PIC’s investment mandates allow for investments in a range of asset classes, including bonds. These bonds are issued by different institutions, such as corporates, government as well as state-owned entities such as Eskom. The PIC has been investing in bonds issued by Eskom and other state-owned entities for years, in line with our mandates,” it said.

Matona likely to leave with R6m payout

Eskom’s management turnstile has ticked over yet again and the exit agreement for the latest ousted chief executive includes an estimated R6-million.

The utility announced this week that suspended chief executive Tshediso Matona and Eskom had “mutually agreed to part ways on an amicable basis”. This follows his suspension in March after just six months on the job. Eskom “expressly noted” that no misconduct or wrongdoing is alleged by the utility against Matona.

The awarded settlement, as reported by Business Day, is believed to be equal to 12 months’ salary.

In Matona’s employment contract, as included in the documents submitted to the labour court by Eskom last month, it stipulated that he would earn a package of an annual cost-to-company of R6-million. It also says he would be entitled to his remuneration package in the case of a suspension.

Eskom would not comment on the figure as “a settlement between Mr Matona and the Eskom board is a confidential matter”, it said.

“However, since Eskom is governed by the Public Finance Management Act, the details of his departure will be disclosed when the annual report for the current financial year is released next year.”

The utility said the suspensions of the three other Eskom executives, which occurred on the same day as Matona, remain unchanged.

If there’s any decision to extend or shorten acting chief executive Brian Molefe’s secondment, this will be decided upon by the board and the minister of public enterprises, Eskom said.​
 

Utterly Confused

Well-Known Member
Joined
Feb 8, 2015
Messages
354
Every day a different bird brain idea. Connect e-tolls to licences... Sell government's share in Vodacom... Sell Eskom assets... Make Eskom attractive to investors...

The wheels of government move so slowly or not at all. When they do move, the speed is pedestrian, the projects are fraught with mismanagement, corruption, nepotism, misguided policies, maladministration. Then when all has failed, whites are blamed. And so the pattern repeats. No lessons learned.

It is a never-ending pit of incompetence and malfeasance, guaranteed to achieve little, nothing, or else actually incur massive losses/debt.

RIP SA
Brilliant! Milano, why don't you run for president you've got my vote. :D
 

Stokstert

Executive Member
Joined
Jul 22, 2007
Messages
5,264
The government pension fund would be as save as the useless Transnet fund if it is used to finance Eskom.
 

Rocket-Boy

Executive Member
Joined
Jul 31, 2007
Messages
7,680
And when they lose the money they have guaranteed for the pension fund then they will turn to taxpayers to get it back.
It doesnt bode well for anyone.
 

Necuno

Court Jester
Joined
Sep 27, 2005
Messages
58,567
And when they lose the money they have guaranteed for the pension fund then they will turn to taxpayers to get it back.
It doesnt bode well for anyone.
Especially those waiting on others to make it right.
 

Jola

Honorary Master
Joined
Sep 22, 2005
Messages
18,423
Every day a different bird brain idea. Connect e-tolls to licences... Sell government's share in Vodacom... Sell Eskom assets... Make Eskom attractive to investors...

The wheels of government move so slowly or not at all. When they do move, the speed is pedestrian, the projects are fraught with mismanagement, corruption, nepotism, misguided policies, maladministration. Then when all has failed, whites are blamed. And so the pattern repeats. No lessons learned.

It is a never-ending pit of incompetence and malfeasance, guaranteed to achieve little, nothing, or else actually incur massive losses/debt.

RIP SA
Needs to be repeated again.
 

supersunbird

Honorary Master
Joined
Oct 1, 2005
Messages
48,390
What retards. Eskom has enough money. They are just wasting what they have, throwing more money at it won't solve it, it will just be gobbled up with nothing to show for it.

And since they not selling equity, my equity portions in my RAs and provident fund are save (60 to 75% equity, 5% to 18% property) in most ways, its the 8% to 15% bond fund portions that might have a bit of risk (if they buy into it that is).
 

CeeBee

Expert Member
Joined
Jul 27, 2006
Messages
2,155
they want to use people's retirement savings? well, u definitely not touching my fn retirement savings!
you can't even prove to stupid people that you can work responsibly with money. its very clear that everything gov touches, gets f'd up.
instead of throwing more money to Eskom, why not get them to act responsibly with what they have? let the private sector show how to run business. of course its gonna mean cutting the freeloaders and thieves (yes, those inside and out of gov), which of course gonna mean loosing votes.
but it needs to be done to save Eskom, and more
 

GhostSixFour

Mafia Addict
Joined
Nov 9, 2009
Messages
12,650
How much of the pensions will be used for pointless catering? To meetings where no decisions will be made? By those who are too clueless to realise their incompetence.
 
Top