File picture: Bhekikhaya Mabaso/African News Agency (ANA).
JOHANNESBURG - The Congress of South African Trade Unions (Cosatu), the country’s biggest labor federation, said it won’t reach a pact with business on how to resolve the debt crisis at Eskom Holdings SOC Ltd. by the time Cyril Ramaphosa, the country’s president, gives his state-of-the-nation speech on Thursday.

Cosatu and Business Unity South Africa, the main business lobby group, had previously said they’d hoped a pact would be announced in the speech. 

Cosatu has proposed using the state pension fund manager, the Public Investment Corp., and government-owned development finance institutions to cut Eskom’s debt by 254 billion rand ($17.1 billion) to 200 billion rand.

“We’ve agreed more engagements and consulting is needed for all social partners,” said Matthew Parks, Cosatu’s parliamentary coordinator. “We’ve agreed to give space for the next few weeks.”

The financial health of Eskom, which supplies almost all of South Africa’s power, threatens to cost South Africa its remaining investment-grade rating and its inability to provide sufficient power is hindering economic growth.

Rival Opposition

Cosatu’s proposal has engendered opposition from unions in rival federations and opposition parties who say the PIC won’t get adequate returns by investing further in Eskom. The PIC manages money for the Government Employees Pension Fund, which is a defined benefit fund, meaning that if it can’t pay out pensions the government must pay the shortfall.

Cosatu is struggling to get support from some of its member unions for the proposal, two people familiar with the situation said, declining to be identified because a public statement has not been made.

“Markets misunderstand the complexity of what is happening behind the scenes and have misinterpreted Cosatu as being representative of all labor” groups, said Peter Attard-Montalto, head of capital markets research at Intellidex. “The process now clearly needs to reset as everyone waits to see actually what wider buy-in Cosatu has.”

The plan was endorsed by Cosatu’s Central Executive Committee in November, Parks said.

“We are now embarking on a process of reporting back to members of unions to get a further mandate to ensure members views are heard and incorporated,” he said.

Ramaphosa will probably give an overview of the objectives and talks, which began a little over a week ago, in his speech, Parks said.

BLOOMBERG