Cosatu’s Eskom proposal lays bare the enthusiasm of unions, government and big business for raiding new sources of cash to shore up the crippled power generator without dealing with the problems that have caused the crisis.
It has become obvious over the past decade that state-owned enterprises like Eskom are failing not because they are short of cash, but because of corruption, crony empowerment, inefficiencies and overstaffing.
Were these destructive factors to be removed, there would be no reason why entities such as Eskom would not attract the investment needed to set them on a sustainable footing.
But so long as the strategy is simply to seek out new sources of cash to prop up failing companies, the multi-billion rand pensions and savings of ordinary South Africans will be all the more vulnerable.
This is underscored by the fact that new sources of funding are being sought without there being a single prosecution for state capture of any senior figures in government or the executive echelons of state-owned enterprises. Many of them remain in their posts, and there is little to indicate that they have changed their behaviour fundamentally.
Cosatu’s proposal is to cut Eskom debt to R200bn from its current level of about R454bn by using funds from state-development institutions and Africa's largest asset manager, the Public Investment Corporation (PIC), which manages more than R2 trillion, mostly the pensions of public sector workers.
It is evident in the deepening budget deficit and government debt levels that have more than doubled in a decade that state capture has exhausted the traditional sources of public funds the African National Congress (ANC) counts on to sustain the patronage networks that hold it together.
As it runs out of money, the government is being forced into a corner where it may have to retrench thousands of workers, impose tough austerity measures, and review costly procurement deals with BEE firms.
However, as our polls show, ANC support is already sliding, and cutting off the cash to government workers and tenderpreneurs will accelerate that decline.
In view of this, the government is turning to alternative cash sources, beginning with the last reserves squirrelled away in the recesses of public institutions.
In the past week, for example, it emerged that South African Airways was eyeing the R100 billion surplus in the Unemployment Insurance Fund (UIF) ‘to seek out solutions to alleviating financial challenges’. A week earlier, it secured a R3.5bn bailout from the state-owned Development Bank.
And now the trade unions and big business at Nedlac are agreeing that maybe it’s time to open the financial Pandora’s Box of government workers’ pensions.
The PIC is a treasure trove of cash, and the temptation is proving too great for them to resist. They will argue that they will only take a limited sum, and use it responsibly.
We would suggest that what’s happening here is that unions have struck a deal with government, and that they will tell their members that in exchange for a government promise not to retrench or cut perks, workers should allow it to risk their pension savings to keep state-owned companies afloat.
But the impact will likely extend beyond the public service. As much of public sector pension savings are in defined benefit funds, this means the pension is guaranteed whether or not the fund has money – the burden would simply be transferred to taxpayers. The PIC can therefore surrender pension money in the expectation that government may later recoup it from the taxpayers.
As the need for cash grows, it is likely the takings of pension savings will increase, for which taxpayers will ultimately be on the line.
Once public sector pensions are gone, the next vulnerable source of cash will be private money. The argument will be that public service workers have made immense sacrifices, while the rich, the private sector, the banks and so on, have done nothing.
This rationale will be used to justify the next step, which will be to compel banks and private pension funds to invest a percentage of their assets in state-sanctioned ‘development’ programmes through prescribed assets. This has long been a declared policy objective of the ANC and one we have warned of for many years.
The planned raid on pension funds shows that the era of state capture is not over. This week the daylight robbery of pensioners and taxpayers was planned before our very eyes by unions, the government, and business leaders.
Frans Cronje is CEO of the Institute of Race Relations (IRR). Michael Morris is head of media at the IRR. Views expressed are their own.