Business Maverick

Union disunity holds up Cosatu’s Eskom bailout idea

By Kevin Davie 12 February 2020
Caption
The region of Mpumalanga Province in South Africa, where numerous of Eskom's coal burning power stations are based, is one of the most polluted areas in the world.Kusile Power Station on Monday, December 23 2019. Pic: Waldo Swiegers / Bloomberg

The Federation of Unions of South Africa (Fedusa), the second-largest national trade union grouping in South Africa, has come out against Cosatu's idea of relieving Eskom's debt by tapping the state pension funds, complicating the effort. The result is that its now unlikely to be part of Thursday's presidential State of the Nation speech.

Social partner participants in last-minute discussions in Nedlac to get a framework agreement on the restructuring of Eskom in time for Thursdays state of the nation (SONA) address by president Cyril Ramaphosa were confident at the beginning of the week that it would be agreed in time.

But by Tuesday afternoon (February 11) discord in the ranks of organised labour meant that the parties had to acknowledge that there would not be sufficient consensus for the mooted framework agreement to be in place in time for SONA.

This followed a statement issued on Monday by Fedusa, which also has a seat in Nedlac, which took the opposite view to that of Cosatu, saying it did not agree that the pension funds of state workers should be used to bail out Eskom.

“Fedusa rejects the proposal to raid R254-billion of public servants’ pension money warehoused in the Public Investment Corporation to bail out the utility,” it said, suggesting rather that the utility, like SAA, should be put into business rescue.

“We didn’t want to bulldoze anybody,” says Matthew Parks, Cosatu parliamentary officer, explaining it did not want the present initiative to be just that of Cosatu, it wanted organised labour to be on board.

Parks says Cosatu is confident that differences with Fedusa can be worked out. He says Cosatu is keen to include Fedusa in agreements around restructuring Eskom and “the PSA (Public Servants Association of South Africa) as well”.

He says Cosatu will need to reassure other parties that it will not do anything reckless to pensions, Eskom and the state.

He says Cosatu has a close working relationship with Fedusa, but more work will need to be done around “guarantees and modalities”.

The timeline now for an agreement on the way forward for Eskom moves a few weeks beyond SONA and the February budget with an eye on Moody’s expected review of the country’s creditworthiness in March. Parks says it is hoped that Moody’s may postpone the review to April.

He says that “bricks have been chucked at us” over its proposal for pension funds, subject to conditions, to be used to help restructure and refinance Eskom, but that Cosatu had also received positive and useful contributions from parties such as pension funds and banks.

Deliberations will need a few more weeks, says Parks, explaining the goal is to achieve a 100% social compact.

Martin Kingston, Busa vice-president, who has led the business in discussions on the future of Eskom at Nedlac, said on Monday in an interview with Business Maverick that while Cosatu had catalysed discussions on restructuring Eskom, the framework agreement was expected to be supported by all parties, government, business, labour and civil society.

Kingston said that any restructuring would be within the mandates of the financial institutions involved, so that the fiduciary responsibility of the trustees are not undermined, that risk-adjusted returns were not hurt and that the current regulatory environment is respected, adding it was always the position of business in these deliberations that what is agreed should not include prescribed assets.

Ramaphosa is still expected to reference these discussions in his SONA, and perhaps provide an overview of the engagement and what it is intended to achieve, one insider said.

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