NEWS
06/02/2018 06:15 SAST | Updated 06/02/2018 06:15 SAST

Government Employees Threaten Legal Action Against PIC Over Eskom Bailout

The PSA says the PIC has betrayed workers by agreeing to grant Eskom a R5 billion loan.

Felix Dlangamandla/Foto24/Gallo mages/Getty Images

Government employees have threatened legal action against the Public Investment Corporation (PIC) for its decision to grant Eskom a R5-billion bailout using their pension funds, while Cosatu, initially vehemently opposed to the deal, has said it will "grudgingly support" it.

According to IOL, government employees represented by the Public Servants Association (PSA) expressed "shock" at the decision, and said they felt "betrayed" by the PIC. The PSA represents 230,000 government employees.

On Monday, the PIC announced that it would grant the cash-strapped power utility a lifeline in the form of the R5-billion loan.

The PIC manages the Government Employees Pension Fund. It is Africa's largest pension fund, with 1.2-million active members and over 400,000 pensioners and beneficiaries on its books.

According to Fin24, Eskom approached the PIC looking for a bailout. Eskom's cash-flow problems threaten its status as a going concern. The loan will reportedly fund Eskom's operations for the month of February, but the PIC said three other banks will also have to fund Eskom.

Eskom's financial problems have left it on the verge of insolvency, Fin24 reported. Newly appointed Eskom boss Phakamani Hadebe reportedly said that the company needs R10-billion now, and another R10-billion by the end of February if it is to survive financially.

Eskom spokesperson Khulu Phasiwe told Power FM that the bailout happened at the right time and under conditions affordable to Eskom.

The DA, however, condemned the bailout.

According to IOL, the PSA has threatened legal action against the PIC. In a statement, the PSA reportedly said, "The PSA is shocked by the decision of PIC board and feels betrayed after all parties agreed in principle that no state-owned enterprise would be bailed out until we are all satisfied that governance has improved at these institutions. We oppose this bailout irrespective of how it is termed."

The PSA said it was clear that it could not trust the PIC to look after government employees' pensions, and said there would be "consequences" for the PIC.

Cosatu initially opposed the use of PIC funds to bail out state-owned enterprises, but on Monday said it would "grudgingly support" bailing out Eskom because of the dire consequences to the economy if Eskom collapses.

"We understand the role of Eskom in our economy and we are also thinking of the impact that an implosion of Eskom will have on the economy and jobs in general. We also remain adamant that the power utility should remain in the hands of the state," Cosatu reportedly said in a statement.

"This arrangement though should not be viewed as a blank cheque and since the process of turning around Eskom is partially funded by the workers' retirement savings, we expect that the jobs of Eskom workers will remain safe."