Cosatu’s debt rescue plan for battling power utility Eskom, which has already received support from the public enterprises ministry and the president, should be broached with caution as it is likely to amount to little more than an added “contingent liability by stealth” on the state’s finances.
The use of PIC funds — which manages almost R2-trillion in funds on behalf of the Government Employees Pension Fund — may eliminate Eskom’s burden, by shifting the debt to the PIC’s books, but ultimately that liability is going to rest with the state, said Schultz. Contingent liabilities are the risks posed by commitments that may result in future financial obligations.
“The notion of prescribed assets jumps to mind and this is a slippery slope,” Schultz said of Cosatu’s plan, and comes at a time that SA needed to be “signalling the right policies” to attract investment rather than those that detract from it. Engagements will also need to be had with bondholders, as the matter of dealing with Eskom’s debt burden is “ complex” and unlikely to be solved within the next two years, said Schultz.
The debate about how to address Eskom’s financial difficulties comes as SA heads into tough national budget later this month.
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