The Economic Transformation Committee of South Africa’s ruling African National Congress suggested that pension funds take over some of the assets of the indebted state power company.
The proposal to transfer parts of Eskom Holdings SOC Ltd. into non-state hands was made in a discussion document dated July 8, which considered responses to the coronavirus-induced economic slump. The ANC’s labor union allies oppose privatization of Eskom assets.
“There is a need for continued support for Eskom to overcome its immediate financial and technical challenges and to ensure reliable electricity supply,” the committee said in the document. “A solution needs to be found to Eskom’s debt problem, including the possibility of pension funds being mobilized to take over certain restructured Eskom assets.”
Eskom, which has hindered economic growth by subjecting the country to periodic power cuts, is laboring under a debt burden of at least 450 billion rand ($26.7 billion), and cannot meet its costs.
The proposals around Eskom form part of a broader strategy proposed by the committee to help the economy recover from the impact of the coronavirus epidemic, which it said had highlighted the country’s inequalities.
“The pandemic has brought sharply to the fore the persistent problem of the existence of two distinct economic realities in South Africa – one poor and mainly black, and one rich and mainly white,” it said.
It said the monetary policy could do more to boost growth.
“South Africa needs to deploy a wider range of pro-growth and pro-investment monetary policy instruments that are compatible with the reconstruction of an economy,” it said. “The Covid-19 crisis has provided a clear indication of the role the monetary authorities can play in injecting resources into the economy and in using bond purchases to stabilize capital markets and put downward pressure on longer-term interest rates.”
The committee also urged the government to:
- Finalize the Petroleum Resources Development Bill to accelerate the development of oil fields and push ahead with a plan to build a new oil refinery and petroleum complex
- Create a state-owned pharmaceutical company to produce anti-AIDS drugs.
- Resolve regulatory disputes within the mining industry
- Create a special economic zone for renewable energy in the eastern province of Mpumalanga to preserve jobs as coal-fired power plants in that region gradually close
- Push ahead with a long-delayed auction of additional telecommunications spectrum; and
- Accelerate the creation of a state-owned bank.
Notably there was no mention of South African Airways, the bankrupt state airline which needs a government bailout if it is to survive. While the Public Enterprises Ministry has backed rescuing the airline the National Treasury has said it would be best to close it.