Cosatu wants Eskom deal to be announced at Sona

Discussions at Nedlac over the proposal were ‘overwhelmingly positive’, says trade union.
Cosatu want Eskom's R450bn in debt to be reduced to R200bn. Image: Moneyweb

The bold proposal by Cosatu to relieve Eskom of close to 60% of its debt, using pension money, may be presented by President Cyril Ramaphosa in next week’s State of the Nation Address (Sona), according to the trade union.

The proposal, which comes with a number of stringent conditions, was discussed and received a “massively positive response” at the National Economic Development and Labour Council (Nedlac) meeting by business, government, labour, and community social partners on Wednesday. 

Read:
Busa welcomes union proposals on Eskom
Ramaphosa open to Eskom debt proposal

The plan would see the Public Investment Corporation (PIC) – which manages pensions on behalf of the Government Employees Pension Fund – the Development Bank of Southern Africa, the Industrial Development Corporation and private lenders take R254 billion off of Eskom’s books.

This will be done through a special purpose finance vehicle leaving the embattled utility with R200 billion in debt —  which it has previously said it would be able to handle. 

‘Strong support’

Cosatu has been in discussions with President Ramaphosa and the Tripartite Alliance (ANC, SACP and Cosatu) since November over the plan. At a recent meeting with the president on Monday the bailout received “strong support” said Matthew Parks, Cosatu’s parliamentary officer in an interview on Wednesday. 

“Our proposal has been supported and accepted in principle,” said Parks. 

He added that over the next few days the social partners will be locked in a process of finalising the agreement where they will flesh out the modalities and adjustments “but the principles remain the same and there is an overall agreement”.

“What we wanted is people in agreement on the intervention package from the debt relief to the specific conditions attached to it and that it’s a social compact between government labour and community.  

“[We also] want to see it being presented by the president in the Sona next week as a centrepiece to say: Eskom is the biggest threat to the state of the economy and society and we are intervening,” Parks said. 

Public Enterprises Minister Pravin Gordhan hinted at a lunch briefing on Tuesday that discussions over the proposal were going well, saying the innovative plan was “a great move on the part of labour to say we are part of the solution, not just antagonists to any change that is happening.”

Read: Gordhan open to pension bailout

“Over the next month or two we are going to see fascinating exchanges, helping to get all the resources available in the country to save an important institution like Eskom and get it back to the levels of effectiveness and efficiency required,” said Gordhan. 

Non-negotiables

The fundamental principles of the plan, which Parks said are non-negotiables, are that workers at Eskom will not lose their jobs, the utility will not be privatised and that Eskom must commit to a turnaround plan. 

He also stressed that the investment is not a “blank cheque” and Eskom would have to show what it is doing with workers’ money. 

“We want to see weekly reports from Eskom on the turnaround plan: how far are we with load shedding, maintenance, debt, corruption, expenditure and a just transition,” said Parks.

He added this will ensure that the state starts rebuilding the confidence of society in government and Eskom –particularly when R254 billion is on the line. 

Other key points include:

  • A comprehensive public audit of all Eskom contracts and expenditure, including coal contracts.
  • People who have been found guilty of looting Eskom need to be arrested.
  • Coal suppliers and independent power producers must reduce their rates to market-related prices or have their contracts cancelled.

There are also several conditions on stronger debt collection efforts by Eskom and a move towards renewable energy generation.

The PIC, Africa’s largest fund manager with over R2 trillion in assets under management, would be responsible for the bulk of the rescue package. The PIC would have to use 7% of its assets to fund the bailout, with the rest coming from the developmental finance institutions. 

There would be a spiralling positive effect from this investment, said Parks, for instance, if Eskom is relieved of its debt it can redirect the repayment money to conduct maintenance on its unreliable and ageing fleet. 

He added that the package would reduce the exposure of the state, which has guaranteed R350 billion of Eskom’s debt and, more significantly, would improve the likelihood of not being downgraded by Moody’s, the last rating agency which holds South Africa’s sovereign debt at investment grade.

There would be less load shedding or more predictable load shedding as the utility gets its maintenance in order. A recent study released by the Councils for Scientific and Industrial Research (CSIR) revealed that power cuts experienced in 2019 had cost the economy between R59 and R118 billion. 

Parks stressed that there is “no other alternative” as Eskom, which provides over 95% of the country’s electricity, underscores the entire economy and is running out of time. 

“What is a fact and what is an absolute guarantee is that Eskom can collapse and if it does it will be more damaging than any amount of other disasters,” said Parks.“If Eskom goes under what will happen to all those investments, pensions that are listed on the stock market? They will all collapse, it won’t be a question of a few, it will be 100%. 

“All pensions will be down the drain, all jobs will be lost and there will be no economy left,” said Parks.

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A mega bailout using the pension money of workers. What could possibly go wrong?

Go wrong? Absolutely nothing. Nothing that cannot be fixed by another round of dipping into pension savings of course. The taxpayer trough has been comprehensively raped. Next is the pensions trough, to be closely followed by the prescribed investments one. How else will the NHI be funded (raped)?

Absolutely nothing – that’s why they must rush it through just in case anyone gives it some thought and realises what a disaster it will be. Perhaps set up a commission of inquiry straight away??

Jacob, Molefe, Dudu – even Shabir will be available to serve on this commission.
Well, as long as Jacob isn’t sick. If someone can pay Dudu’s bus ticket. And if they can get the terminally sick Shabir off the golf course.

An absolutely idiotic idea! What happens 2-3 years down the line? Are you going to throw another R250bn in again? Eskom’s problem is 30,000 workers too many and a reckless corrupt culture of no accountability. So this is just a temporary fix, that’s all. This is not a long term solution. Besides who is Cosatu to decide on behalf of all government pension employees on how should their money be spent??

Suggest Cosatu give the guarantee of the R250bn to the pension fund with agreed returns

the ANC government is too scared to take Eskom power production away from the State and hand over generation to the private sector, because immediately COSATU will lose considerable membership from the overstaffed and bloated SOE. Private sector ownership will root out those free-loaders who are not contributing value to the product for the consumers.

First public pensions then private pensions followed by private savings right before private property

nope. private property is going to go first. EWC. as soon as the first property is expropriated without compensation what do you think will happen to the value of the rest?

We came with nothing in this life, surely we will leave with nothing… The ANC will make sure of that.

This is a Fantastic Game changer! Short term pain for long term gain. See the bigger picture. Pensions and equities in the country are ridiculously low. Who would have faith in a country which cant give power to do business. Eskom will be in a stronger positions and even if a small 7% chunk of “Public” pension funds are used, the value of those pensions will go up because equity prices will shoot up! This is a fantastic development.

Is it safe to assume it’s not your pension being used here?

Not yet …

Could not agree with you more. I think this is a fantastic idea all round, my only concern would be the few caveats that Eskom would need to report to the PIC. This would need to be very strictly controlled to prevent ‘interference” from the PIC and any belief they may have that they can appoint and remove senior staff. This deal might actually save the country let alone Eskom.

I’d love to live in your dream land. So Eskom will still have a bloated inefficient work force so the unions dont lose their contributions. Brilliant! And no equity prices will not go up because of another bail out. How do you figure that? Its just going to be theft of other people’s money.
In 2 years Eskom will still be struggling because of BEE and corrupt management. Nobody will be arrested either.
Maybe you work for Eskom?

Of course you realize that the alternative to this is that you and I pay the 450 billion over time. No thanks. Let’s just be clear here, the government will get their money somewhere.

@Dadape: I admire your positivity, but sadly I cannot share your view. I would love to be proved wrong, but I’m not sure I’ll be around that long.

Clearly one of the few EFF members who read Moneyweb or are capable of reading !!! Socialist Drivel !

Sad but will have to agree. Eskom needs the money or all of us will be poorer…

Then why not buy the whole of Eskom’s debt?

Eskom has a financial and operational crises. Fixing the financial side is no guarantee that the operational side will be fixed. Load shedding happens because large scale maintenance needs to be done. This will continue.

DadApe
Either you did’nt go to school or maybe you are smoking some bad stuff?

The only great thing about this is the fact that it will artificially let the Rand keep its value for a while in order for South Africans to get their Rands out and swapped into US$ or Euros. However, since millions of consumers don’t pay for electricity, you can’t postpone the inevitable and Eskom will eventually collapse. Once every SOE gets bailed out in this fashion (since this “pension scheme” is now the blueprint) there will be no incentive for prudent financial management. Once the state coffers are empty, the Government will probably start printing money which will lead to hyperinflation. Get ready to start eating tinned cat food like they do in Zimbabwe.

Perhaps you are on the wrong site here, most of the readers here are educated.

So in essence COSATU is happy to p!ss away its members’ pension money, presumably with the caveat that Eskom doesn’t rid itself of the thousands of good-for-nothing dead wood excess employees. What could possibly go wrong..?

Dead simple thing that. Spending other people’s money is easy. The interesting part is allegedly when that runs out. We wait and see.

The tail is wagging the dog.

Members were not consulted and they are not happy about this.
I hope, for once in SA politics that democracy works at it should.
Members should resign in huge numbers.

So now the union bosses, AKA commies/socialists/comrats want to own Eskom.

They are so skilled at running a business, what could possibly go wrong…………………………

It would be a noble effort if the PIC and GEPF accept that this money for the loan is at risk … ie. If ESKOM can’t pay it back, then the GEPF takes the loss.

All that’s is happening is that the loan is a front for a government / taxpayer bailout, hoping that Moody’s etc. don’t see through this pathetic facade….

Just like the SAA loan received from the DBSA … a charade, a veneer. The DBSA lent the money to the Treasury, guaranteed by the Taxpayer …

The Cosatu/PIC loan will be a guaranteed loan with no risk to the Treasury backed by the Taxpayer with no risk as the defined pensions are backed by the taxpayer. Now Eskom will have the Commie Cosatu cadres calling the shots on what can happen at Eskom, without any risk.

This is a coup d tat. – all done at the Taxpayer’s risk.

What a joke!

Astonished that so few can see the reality you describe. It’s a complete sham. Ratings agencies won’t be fooled.

Richard Quest will be thrilled.

What kind of investor sets a precondition that the company must never do rational things like right-sizing its labor force?

I wonder who will represent that equity in Eskom? The unions, the PIC?

Cosatu is not saving Eskom. Cosatu is buying time, kicking the can down the road and playing for the crowd. Cosatu is still the same old communist workers party. The SACP is still the mouldy, old fashioned and pathetic communist party. The ANC is still the shameful, highly inefficient and corrupt socialist, communist and collectivist party. At the Tripartite Alliance, they sit and concoct all these retrograde ideas. Then they pat each other on the back for supporting each other. They started by robbing Peter to pay Paul. They stole from consumers to pay Cosatu members. Now they came up with the next brilliant idea to rob Paul to pay Paul. They will pay themselves out of their own pension funds.

This is not a bailout. Not by far. They are simply opening the door to another form of looting. This is simply another infringement of property rights. They do not intend to do the right thing. They don’t want to sack the inefficient and unproductive overburden of workers, so they plunder property instead. Simply another step in the same direction.

What lies at the end of this road we are travelling on? Well, the pension funds will run dry at some stage. Then they will move to confiscate the next shared resource, the purchasing power of the currency. They will say that it is the best strategy to rescue Eskom. They will say that without Eskom, the country is doomed anyway. They will print money to pay the salaries. Hyperinflation is built into the socialist and communist cake. It is part of the collectivist ethos. This is the end of the road.

it is at that day when the pension fund runs dry, i would like to hear what the current tripartite alliance would be able to explain to its members / pensioners – every thing else will be blamed before they will be man enough to put it straight: due to our incompetence to manage anything financially or otherwise,we have utilised your pension money to cover our fatal mistakes – thanks for the understanding that you inherited a non-existing-dry-runned-pension-fund – its money was put into eskom’s bottomless financial pit

let us try again

They will just blame it on apartheid

How does it work that Cosatu, a union that has state and private workers, gets a say of any kind in where assets of GEPF must go?? Surely a minor proportion of the GEPF is related to Cosatu membership???

I only agree with one point – arrest those who were corrupt!!

Hang on tightly. This is going to be a bumpy ride!!

False, needs to be arrest, prosecute and incarcerate!

Just arrest and redeploy is what we will see… Musical looting, “ok, everyone’s been caught, everyone move one department to the left and have some fun”…

Am I not understanding this correctly ? Eskom’s debt exposure will not be reduced, only the holder of the debt will change (PIC instead of existing). Interest payable will remain the same – if it’s reduced to below market rates then the PIC (taxpayer) is subsidizing Eskom. There will be no benefit to Eskom via reduced “repayments” – Eskom will still have to pay interest. Eskom is not struggling with capital repayments, it’s the interest burden and operating costs that are the problem. Govt guarantees the debts (solvency) of the PIC, so not sure any ratings agency is going to be fooled by this reshuffling of debt.

That’s the wrong answer, to throw more money at the scumbags that robbed you last time. Better to invest in your own power generating assets.

‘Eskom would have to show what it is doing with workers’ money.’

Agreed.

But given that the pensions in question are defined benefit, the downside risk of this arrangement will be borne by the state and therefore the country’s tax base. The quid pro quo should be that all pensions or some pensions (e.g. recently retired, current and future Eskom employees; COSATU members) be converted to defined contribution pensions at the lowest valuation over the past 10 years, adjusted for CPI.

So now we have Unions who themselves are the reason we have endless strikes, a workforce that is riddled with the sentiment that “its my right” for everything to be given to me FOR FREE are now going to run Our Pension funds as their personal piggy bank.

The reason the country is in this situation is you can no longer count on Tax Revenue as you have breed the mentality that everything must be Free including the choice to pay for services which the majority do not, pay taxes which as we can see most don’t bother with anymore, The few that do the Government manages to prove they are incapable to manage the funds effectively that is to say that which is not stolen via “Job Creation” or more aptly put Vote buying, the exorbitant wages and salary increases given each year to Government officials and SOE’s who are clearly capable of achieving squat expect to blame someone else for their mistakes.

The total lack of planning and any form of rational use of Grey Matter for the last 26yrs under the ANC rule, promises that you cannot conceivably achieve or fund via taxation (or without as is this case now steal more money via the pension funds)as productivity is at an all time low thanks to forcing people into roles they are not qualified to do (or false qualifications), then allowing the Unions and rewriting Labour laws to protect these leaches on our society.

Rewriting the constitution so that you can take what ever you want to appease the masses while you the ANC and Unions steal from society to enrich the few. Any wrong doing by the ANC or the elite is simply washed away with another comity (more Job Creation) of corrupt members to investigate the corrupt to absolutely no End.

Arms Deal – Oh that’s right still “under investigation” 21 years later
Sanral, Eskom, SA Rail and so on and so on.

Wake up South Africans, get involved the Rest of the world the parasite called the ANC is on the brink of killing its host.

Ladies and gentlemen, its time to short the Rand. If this is announced at SONA, expect a bloodbath. Doubly so when it an archaic government defined benefit pension fund, backed by the treasury.
Cry beloved country.

Why is Cosatu recommending a special purpose vehicle that is listed on the JSE? Set up the deal for a debt-equity swap, so owners of the fund effectively become owners in Eskom. That way they can plough as much of their own personal money into the fund to bail out the utility – since they are such fine investors.
… Oh wait… shoot… never mind.

Pres CR needed the support of the Unions to get rid of Zuma – this is part of the pay-back.

If Cosatu is so positive, why not use Cosatu members pension fund money?

Lets try understand this:

1. The PIC will lend the money to Eskom so Eskom must pay the PIC interest? Then nothing much has been achieved.

2. If the PIC puts equity into Eskom then Eskom has a hugely reduced interest bill but the PIC loses the return on R 250 bn-about R 20bn a year. Moreover the investment is impaired( probably fully) on day 1 as Eskom has operational and over-staffing problems.

3. The price of the bailout is that effective management of Eskom rests with the PIC not the CEO who cannot sack staff which is what is required. All what is achieved is a short term bail out of an unsustainable socialist business model.

What Stuns SAM is the howls of delight that the problem has been solved-or have I lost it?

Spot on, Sam. It’s what uncle Pravin would call a “fiscally neutral” solution i.e. make believe book entries of fairy tale money. This is make believe by the Comrades.

New lesson coming up for the Comrades: WMC is a bitch. Her bite is much worse than her bark. Just watch. There is a wailing and gnashing of teeth of Biblical proportions coming up very soon.

Eskom has to be liquidated ASAP.
The whole energy sector has to be deregulated, liberalised and privatised. COSATU’s plan to dump more money in the bottomless abyss of Eishkom is just insane. Eskom must fall.

how much cash is available in the NLC (National Lotteries Commission)? surely this would be a better alternative than using pension money!

Sorry, its already been looted.

Instead of buying debt, why not use the money to repair power stations. It’s obvious that Eskom doesn’t have the talent – we are now load shedding 24/7 and the geniuses that drew up the load shredding schedules seem to have the brains of a stapler. Bring in the required expertise and get this done. The eskom staff can make sandwiches and pass around bottles of water. Burning pension money to save today, will come back to haunt the folks who won’t be able to retire – and what’s the bet that the unions will once again organise mass action or a strike because of their very own actions…

I actually think this is a good idea. When people have ‘skin in the game’ they take a much closer interest in what is going on and have a vested interest in seeing the thing succeed. After all, its THEIR money (and future comfort) on the line.

It is critical that ESKOM be made to work. It is the one utility (along with water) that MUST be revived. This includes placing relentless pressure on people to pay for the electricity they use. this alone will make a huge difference. To paraphrase a popular saying: Many hands will make the lights work!

That is a great Westernised suggestion, one that would no doubt motivate and enforce the “servant” element in many a public servant. However we live in Africa, do you really think the average government employee is even remotely smart enough to realise that their efforts or more accurately lack thereof is part of the country’s bigger narrative? No chance…

The “average South African” is currently way too busy high-fiving a gun wielding quadbike driving ex-president on Twitter for yet again showing a fat, ugly middle finger to the justice system.

They’re not just handing it over no strings attached. Read the article:

He also stressed that the investment is not a “blank cheque” and Eskom would have to show what it is doing with workers’ money.

“We want to see weekly reports from Eskom on the turnaround plan: how far are we with load shedding, maintenance, debt, corruption, expenditure and a just transition,” said Parks.

He added this will ensure that the state starts rebuilding the confidence of society in government and Eskom – particularly when R254 billion is on the line.

Other key points include:

A comprehensive public audit of all Eskom contracts and expenditure, including coal contracts.
People who have been found guilty of looting Eskom need to be arrested.
Coal suppliers and independent power producers must reduce their rates to market-related prices or have their contracts cancelled.

There are also several conditions on stronger debt collection efforts by Eskom and a move towards renewable energy generation.

On the 23 August last year in an interview with News24 Matthew Parks, Cosatu parliamentary coordinator made the following comments:

Parks said that Cosatu had supported the investments of the Government Employees Pension Fund by state asset manager the Public Investment Corporation. However, there has always been a caveat that the investments of the depositors should be protected.

Even though there is space to fund development of the state with pension funds, ultimately the burden of failed investments will fall on the fiscus, he said. Members of the GEPF have defined benefits, which means that government will have to make up any shortfalls from investments that go awry.

“If there is mismanagement, the government will have to come to the party to make provision for the defined benefits”

He added, “there must be a “healthy, above inflation return” on investments to protect the depositors”.

If one assumes that these pre conditions remain part of the current proposal, then it is clear for all who want to see that, in essence this is nothing but an attempt wish the problem away. At the same time Cosatu and the ANC pat themselves on the back and tell us how lucky we are to have them.

Pensioners should be singing their praises. Not only is your capital being guaranteed by the SA taxpayer, you will also be recieving a healthy predetermined above inflation return.

Can I join?

Cosatu are redistributing state employees pensions in the process and using them as the lender of last resort. Not very democratic or constitutional.

The confiscation of property for the greater good of SA… land is not the only thing termed as property.

So your constitutional question is about perspective… and those changes are already in the pipeline.

We desperately need two Trumps,one to run SA and another one to run Escom like a business. He would immediately fire all deadwood employees, set specific objectives including maintenance programs, efficiency targets and debt reduction and kick ass to ensure that the objectives are met. If there is a strike, import temporary workers from China and don’t pay the strikers. China just built a new hospital to deal with the coronavirus in 10 days!!!!
It is unbelievable that we have millions of incompetent lazy imbeciles led by a government of incomprehensible stupidity with unbridled corruption. For God’s sake look at Zimbabwe and wake up – we are going directly and at ever increasing speed into the same abyss. On second thoughts, even if our “leaders” wake up it won’t make an iota of difference, they are simply not competent. Oh woe is SA and our future. Be positive at your peril.

Trump may be bellicose but at least he can make decisions unlike our spineless self interested ANC elite bosses. If COSATU were genuine about “saving” Eskom they would volunteer to take a pay cut, maybe some early pensions to trim numbers. As it stands, all very well to demand Eskom account for where the money is spent but if unions disagree all they can do is whine, the money she is gone, paid to wekkas. Stupid is as stupid does.

“The bold proposal by Cosatu to relieve Eskom of close to 60% of its debt, using pension money, may be presented by President Cyril Ramaphosa in next week’s State of the Nation Address (Sona), according to the trade union.”

As if the debt has disappeared? Relieved?

How will Eskom pay this back if they are unable to pay their current debt? Oh, wait! Eskom will NEVER repay but will simply roll it over forever.

The ANC is in power for self-enrichment of its members and is thus prepared to retain that power at any cost.

If anyone still reacts with disbelief at any action or inaction taken by the ruling party, then they have not yet fully accepted/realised the extent of what ‘at any cost’ means, both now and in future.

If one is struggling to accept the above theory and still finds themself frequently shaking their head in disbelief, then for a moment step into the shoes of the ANC whose goal is self-enrichment through the retention of power. Now, instead of being preposterous, it is entirely reasonable, maybe even aspirational, that the ANC sees Zanu PF’s reign in Zimbabwe as highly successful.

…‘there can be no doubt that there are political leaders in our country who despite the terror and the poverty, the food/medicine/fuel/currency shortages of Zimbabwe…see only one thing, that, almost four decades into power, Zanu-PF is still in charge, that this is a success and that maybe the ANC might be similarly successful here too’. https://dailyfriend.co.za/2019/07/21/a-very-odd-phenomenon/

PS. Can MoneyWeb please give Sensei his own ‘column’ already.

I assume that everyone who has read this article fully understands that the owners of the money, the GEPF members HAVE NOT BEEN CONSULTED.

COSATU officials do not belong to the GEPF and have no right to gamble away their members funds without getting a mandate from them through a ballot.

What we see here is just another form of corruption and looting, by
a. Union officials,
b. Politicians
c. Business

NOT ONE OF THEM HAVE A DIRECT INVOLVEMENT IN THE GEPF. IT IS NOT THEIR FUNDS AND THEREFORE ONE CAN ONLY DRAW THE CONCLUSION THAT THEY ARE ONLY THERE FOR THE LOOTING OF THIS PIGGY BANK

End of comments.

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