PIC says it has not yet been consulted about plan to slash Eskom's debt

State-run asset manager the Public Investment Corporation has said it is "ready to engage" with stakeholders about a proposal put forward by trade union federation Cosatu to use PIC funds to provide debt relief for beleaguered power utility Eskom.

In a statement on Thursday, the PIC said it had not been consulted about the proposal, which has been critised by some labour organisations not affiliated with Cosatu. The asset manager was also "well aware of the risk that Eskom poses to the South African economy and to the funds invested on behalf of its clients," it said. 

Should it receive a proposal to further invest in Eskom, it would follow its usual governance process as outlined in its investment mandates. 

On Wednesday trade union Solidarity threatened legal action if the pensions of government employees were used to cut Eskom's R450bn debt burden, saying this would be in breach of the PIC mandate and amounted to "pension capture". Federation of Unions of South Africa (Fedusa) and South African Federation of Trade Unions (Saftu) have called for more engagement on the matter.

The PIC, which manages over R2 trillion in assets and invests on behalf of government employees pension funds, said it is "ready and keen to engage with various stakeholders to find a suitable and sustainable solution for the systemic risk posed by Eskom".

"Such a solution must be in line with prudent management of client assets," it added. 

Cosatu's plan - which proposed the creation of a "special purpose finance vehicle" to take over about R250bn of Eskom's roughly R450bn debt, served as a basis for talks between unions, government and business. Talks are ongoing.

The finance vehicle would involve a "social compact between government, the Public Investment Corporation, the Development Bank of Southern Africa and Industrial Development Corporation," said Costau in its proposal.   

The debt restructuring proposal was one of 27 "interventions" proposed by Cosatu. Other points included a public audit of all Eskom contracts and expenditure, a reduction in the prices charged by coal and renewable energy providers, worker representation of the utility's board, and a staff audit. 

But the PIC said neither it nor its clients had been consulted about the proposed funding. 

"Every 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," it said. 

The asset manager said it was "obligated to always act in the best interests of its clients, whilst giving due regard to the national interest".

"The PIC, being a prudent asset manager, is well aware of the risk that Eskom poses to the South African economy and to the funds invested on behalf of its clients.

"We believe a long-lasting solution should address, amongst others, Eskom’s growing debt burden, [the] impact of Eskom power generation business on the environment, governance reforms, operational effectiveness, improving procurement practices, and ensuring a reliable supply of power to the economy."