File image: Pixabay.
File image: Pixabay.

Global auditor Mazars warns about bail-out via pension fund savings

By Siphelele Dludla Time of article published Feb 5, 2020

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JOHANNESBURG - Fiscal prudence would be needed in using government employees’ pension savings to bail out Eskom’s R454 billion debt, cautioned analysts at Mazars, a global audit, accounting and consulting group, yesterday.

South Africa’s biggest labour federation Cosatu has proposed the use of government-owned pension funds as a means to alleviate the financial burden at the power utility.

Eskom’s balance sheet has been in the red for a number of years and the power utility expects to report repeated losses of about R20billion this financial year.

Bernard Sacks, a tax partner at Mazars, said yesterday that there was no inherently right or wrong answer in this kind of arrangement.

Sacks said the litmus test for dipping into workers’ pension savings should be the potential return that could be generated by investing in a company like Eskom.

“The question that I would have is to what extent are you going to get a return, certainly in the short term, on that investment. That will also have to be accompanied by operational improvements, as well as greater financial discipline, because I think that discipline has been lacking,” Sacks said.

“What it might do is provide sufficient breathing space on the fiscal side to Eskom to start performing better. And so what might have initially seemed not a great idea, what it might do is give that a necessary boost financially.”

Cosatu wants the Public Investment Corporation (PIC) and state lenders to take over at least R254bn of Eskom’s debt. This is also seen as a means to stave off a looming credit ratings downgrade as Eskom’s mounting debt has been flagged as the biggest threat to the country’s fiscus.

Cosatu insists that the PIC is already exposed to Eskom to the tune of R95bn, and the intervention is about securing the money that has already been invested there.

“This is a moment of national crisis and we need social compact on how to save Eskom and the economy,” Cosatu said in its key economic interventions and proposals document.

“The investment in Eskom is conditional, because we acknowledge that we cannot put the worker’s retirement savings on the power utility without some drastic steps being taken first, including workers sitting on the board and a forensic investigation being instituted.”

On Friday, newly-appointed Eskom group chief executive André de Ruyter told journalists that his administration did not intend approaching the government for additional funding.

De Ruyter said Eskom needed to be run like a self-sufficient business, adding that that he had been communicated to all senior managers across the country.


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