The Democratic Alliance (DA) has slammed the signing of an agreement between labour, business, and government as a “stealth bailout” that will jeopardise state pensions.
“The agreement signed today at the National Economic Development and Labour Council (NEDLAC) between labour, business and government, initially proposed by Cosatu, amounts to a betrayal of workers and the public at large, who will end up paying when government can no longer afford public pensions,” said DA Shadow Minister of Finance Geordin Hill-Lewis.
The agreement was signed on 8 December at the NEDLAC 25th Annual Summit, and sees the Public Investment Corporation (PIC) and other parties committing to the support of Eskom’s financial future.
The compact includes a proposal for the conversion of more than R280 billion in Eskom debt to equity.
Hill-Lewis said that without the approval of the Government Employees Pension Fund (GEPF), however, the PIC cannot proceed.
“The GEPF is unlikely to ever be able to approve such an obviously bad investment because this will be contrary to their fiduciary duty to their members (who are current and future pensioners) and will therefore be illegal,” he said.
“Without the GEPF’s agreement, today’s signing ceremony was an irrelevant exercise in futility.”
Bailout by stealth
The DA said it would fight to oppose this proposal, which it called a “bailout by stealth”, as it would only result in the government bailing out the GEPF instead of Eskom.
“The proposed ‘conversion’ of more than R280 billion in Eskom debt to ‘equity’ is a sham,” Hill-Lewis said.
“There is no prospect of the PIC ever earning a return on this investment from Eskom.”
“This means there will be a giant hole left in GEPF funds, which in turn means the GEPF will have to be bailed out by the government down the line,” he said.
For this reason, he inferred the government will essentially be bailing out Eskom through government pensions.
However, he also warned that due to the state of South Africa’s finances, the government will likely be unable to bail out the state pension fund – potentially destroying many South African pensions.
“And that is why workers should not take the risk, and why this scheme should be stopped now,” Hill-Lewis said.