{"id":378197,"date":"2020-03-01T08:23:00","date_gmt":"2020-03-01T06:23:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=378197"},"modified":"2020-03-01T13:21:42","modified_gmt":"2020-03-01T11:21:42","slug":"using-pensions-to-pay-off-eskoms-debt-may-be-the-only-option-experts","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/378197\/using-pensions-to-pay-off-eskoms-debt-may-be-the-only-option-experts\/","title":{"rendered":"Using pensions to pay off Eskom’s debt may be the only option: experts"},"content":{"rendered":"

The Congress of South African Trade Unions (Cosatu), the nation\u2019s biggest labour organisation, has suggested<\/a> that government use R250 billion in government pensions to help pull Eskom out of debt – and experts think it could be a good idea.<\/p>\n

Cosatu has proposed the use of civil servant pensions and a state-run unemployment fund to cut Eskom\u2019s debt by about R254 billion, which would then leave the power utility with a sum of around R200 billion to service.<\/p>\n

Eskom has previously said it can manage this sum.<\/p>\n

The PIC manages in excess of R2 trillion on behalf of clients that include the Government Employees Pension Fund (GEPF), Unemployment Insurance Fund (UIF), Compensation Commissioners\u2019 Fund (CC) and several others.<\/p>\n

Speaking at a panel hosted by Rapport<\/a>, political and economic experts from North West University weighed in on the debate, saying that not only is using pensions in this manner a good idea, it may also be the only option.<\/p>\n

Theo Venter, a political expert at NWU said that the government would have to seriously consider Cosatu’s proposal, one way or another. And professor Raymond Parsons, a lead at the NWU business school, agreed.<\/p>\n

The analysts noted that South Africa has the eighth-highest pension savings in the world, in dollar terms, while the use of the funds isn’t a bailout, but rather a loan, which Eskom would need to pay back.<\/p>\n

The other point favouring such a move is that the state pension fund is a fixed-benefit fund – meaning that no matter how much money is in the fund (or taken out), the state needs to make up the balance.<\/p>\n

The only real alternative, they argue, is to raise taxes to pay off Eskom’s debt – which didn’t happen in the budget this past week.<\/p>\n

However, both analysts warned of the massive risks associated with this proposal, and urged government to move carefully and with sober minds when dealing with pensions.<\/p>\n

Growing support?<\/strong><\/p>\n

While Cosatu’s plan has not been directly endorsed by government, finance minister Tito Mboweni has expressed a degree of approval for it.<\/p>\n

Speaking in a pre-budget meeting with\u00a0media<\/a> this week, Mboweni said that using pensions is a good idea<\/a>.<\/p>\n

However, he said that if dipping into pensions is considered, it should not only be limited to government pensions managed by the PIC, but should also extend to private pensions as well.<\/p>\n

\u201cIf we go the pension route \u2013 it must be all of us. It can\u2019t (only be) public servant pensions, it must be all pensions,\u201d Mboweni was quoted saying.<\/p>\n

\u201cI think it is a good idea, it must be encouraged. Other institutions can look at the option.\u201d<\/p>\n

The PIC, meanwhile, said that no formal processes<\/a> have taken place to enact the plan, adding that if any such suggestion comes its way, it will deal with it as it would any other.<\/p>\n

\u201cEvery decision the PIC takes is based on the merits of each investment proposal and aims to generate risk-adjusted financial and social returns for our clients,\u201d the PIC said.<\/p>\n

\u201cShould the PIC receive a proposal to further invest in Eskom, the PIC will follow its governance process as outlined in the investment mandates to arrive at a decision.\u201d<\/p>\n

Others have taken pre-emptive action to stop the process<\/a> before it gains any more traction.<\/p>\n

South African labour union Solidarity began a legal process to block plans to use the state pension fund, looking for a court guarantee that this can’t be done.<\/p>\n

\u201cIf Solidarity does not receive such a guarantee, or if a decision is made to implement the controversial Eskom plan, Solidarity will take further legal action, which may include urgent legal assistance,\u201d the labour union said.<\/p>\n

\n

Read: Mboweni says using government and private pensions to fund Eskom \u201ca good idea\u201d<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Cosatu has suggested that government use R250 billion in government pensions to help pull Eskom out of its growing debt problem – and experts think it could be a good idea.<\/p>\n","protected":false},"author":10,"featured_media":101676,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[1470,1164,26,7516,1632],"class_list":["post-378197","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-cosatu","tag-eskom","tag-headline","tag-north-west-university","tag-solidarity"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/378197","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=378197"}],"version-history":[{"count":6,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/378197\/revisions"}],"predecessor-version":[{"id":378213,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/378197\/revisions\/378213"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/101676"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=378197"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=378197"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=378197"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}