Government signs Eskom social compact
JOHANNESBURG - THE GOVERNMENT yesterday signed a social compact that could see a portion of pension funds being used to reduce Eskom’s R480 billion debt and its huge interest service bill.
The Eskom Social Compact, initially proposed by labour federation Cosatu, was signed by all social partners yesterday at the 25th Annual Summit of the National Economic Development and Labour Council (Nedlac).
The deal could see the Government Employees Pension Fund (GEPF), one of the largest pension funds under PIC management, write off the R104bn in Eskom debt they currently hold.
The social compact proposes a comprehensive plan with 35 key intervention areas to stabilise and rebuild Eskom.
These look at job security at Eskom, tackling corruption and wasteful expenditure, reducing a bloated management, and reviewing coal contracts, among others.
One of the key principles is the need to reduce Eskom’s debt burden.
The agreement says that social partners have committed jointly to mobilise adequate financial resources for Eskom.
Nedlac executive director Lisa Seftel said it had been a long time coming for the Eskom social compact. “This represents a historic milestone for our country, demonstrating the ability of social partners to come together under challenging economic conditions and work together to chart a new path,” Seftel said.
Deputy President David Mabuza said negotiation began about a year ago when the country faced a power crisis with the unprecedented Stage 6 loadshedding.
“The social compact remains relevant and will be an important vehicle to hold Eskom to account to rectify the problems of the past, and serve the people of South Africa with sustainable supply of electricity …” Mabuza said.
Political parties have vehemently rejected the proposal to dip into pension funds to rescue Eskom, and analysts have also warned about the dangers this could trigger to the fiscus.
Intellidex’s Peter Attard Montalto said the Eskom deal would increase political pressure on the banks and asset managers to “do something” on this issue.
Montalto said the compact showed a dangerous propensity to grab hold of ideas without appropriately absorbing expert advice.
“We believe the debt for equity swop idea has now become central to the Eskom political task team considerations. This is a blind alley, however, we do not see it progressing. Still, the attempt can cause major fallout risk.”