South Africa

Business Maverick

Solidarity proposes legal steps to stop the exchange of Eskom debt for shares 

A general view of Medupi Power Station on January 1, 2015. (Photo: Gallo Images / Mail and Guardian / Madelene Cronjé)

Trade union Solidarity has put legal action on the table in an attempt to fight off the proposed plan to use the pensions of government employees to cut Eskom's R450bn debt burden, via a share swap. It says it would be in breach of the Public Investment Corporation's investment mandate and of the Government Employee Pension Funds (GEPF) fiduciary duty and must be stopped.

In a letter of demand addressed to the trustees of the Government Employees Pension Fund (GEPF) and the board of directors at the Public Investment Corporation (PIC) the trade union has laid down the law. It has reminded the entities in the question of its responsibility in fiduciary duty of keeping the best interest of the member in mind.

This came after the PIC indicated that it was considering the exchange of bonds held by the PIC on behalf of the GEPF, for shares in Eskom, thereby reducing Eskom’s debt burden.

“Solidarity is strongly opposed to such a move or exchange of bonds for shares, specifically in Eskom, as they believe it will be a bad investment that will not benefit GEPF members and pensioners whose funds are invested by the PIC.” the union says in a press release.  

“Such action will merely be an exchange of income-bearing bonds for worthless shares that will not generate any income to members of the pension fund for the next decade and longer,” says Zirk Gous, an organiser at Solidarity’s Public Sector.  “In practical terms, this simply means that approximately R200 billion of Eskom’s debt will be written off at the expense of public servants’ retirement security”, he says

“It is outrageous to think that the PIC will deal with its members’ pension money so irresponsibly,” he says.

He adds that National Treasury has acknowledged receipt of the proposal but is waiting for the PIC’s formal acceptance. But does emphasises that the letter serves as a firm warning to the two legal entities of future legal resistance. 

In the letter of demand, Solidarity pointed out to the trustees their fiduciary duty, and also that individual trustees and board members will be held personally liable if they failed to fulfil their fiduciary duty.

The mandate of the GEPF and the PIC is to act in the best interests of the members of the pension fund, and it would not be in the best interests of the GEPF members to exchange Eskom debt for shares that will not yield an income, referring to the R190-billion in Eskom bonds held by the government pension fund. 

“Solidarity will not hesitate to institute further legal action against the GEPF and the PIC,” said Anton van der Bijl, head of Solidarity’s Legal Services. “This would just be another way of using ordinary people’s retirement money without their permission to fund a struggling state enterprise. We will do everything in our power to stop this unscrupulous exploitation.” BM/DM

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