From business rescue to court action: Other unions react to Cosatu's plan to cut Eskom's debt

An electricity pylon (iStock).
An electricity pylon (iStock).

As talks continued this week around proposals first put forward by trade union federation Cosatu to cut the debt of power utility Eskom, other labour organisations have reacted by proposing the state-owned entity be placed under business rescue, threatening court action, or saying consultations with members was needed.  

The talks to use finance from public and private institutions to cut Eskom's R450bn of debt by around R250bn gathered pace last week in meetings between government, business and labour held under the auspices of the National Economic Development and Labour Council. Eskom does not make enough from selling electricity at current prices and volumes to pay off the interest on the debt. 

A proposal put forward by Cosatu to create a special purpose finance vehicle using funds sourced from state-run asset manager the Public Investment Corporation and other state institutions to cut debt served as a basis for the talks. Cosatu previously said that government, unions and business had "in essence" accepted that its proposal could serve as a basis for the debt restructuring plans. The PIC did not respond to a request for comment. 

The debt restructuring proposal was one of 27 "interventions" proposed by Cosatu that served as a basis for discussions. 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. 

Business rescue 

Federation of Unions of South Africa (Fedusa) acting general secretary Riefdah Ajam told Fin24 that certain aspects of the proposed deal to restructure Eskom's debt had not yet been clarified during the engagements.

Ajam said the union federation wanted the debt-laden power utility to be subjected to fundamental restructuring and for it to be placed under business rescue.

"We can't accept R250bn debt write-off with no accountability ... Government bonds must be issued to raise money to ease the debt on Eskom," said Ajam.

Ajam said other state-owned entities were languishing under a cloud of uncertainty because of corruption and mismanagement. A possible solution was to also place these organisations under business rescue to restructure their business models.

"We want to see, not throwing money at the problem, but a sustainable turnaround strategy. This includes the facilitation of a 'user pays' system. We won’t hesitate to institute class action because South Africans are being double taxed," Ajam said.

South African Federation of Trade Unions (Saftu) general secretary, Zwelinzima Vavi, told Fin24 that the federation would canvass its membership on how to respond. 

"We have had a discussion on that issue. We have not taken a decision and it is not one that we will take without undergoing consultation. It is a very personal and emotive issue. There was a time when one could say 'yes' to such a proposal easily, but that simply is not the case anymore," said Vavi.

'Fixing mistakes with workers' money' 

Trade union Solidarity, meanwhile, has announced it will hold a press conference on Wednesday morning to announce legal action against plans to use the pensions of workers to bail out Eskom.

"To use workers' money to help ailing state enterprises is to make a mistake to correct a mistake," said Dirk Hermann, Solidarity CEO, in a statement.  

On Wednesday last week Reuters reported that President Cyril Ramaphosa is "favourably disposed" to Cosatu's proposal. The president is expected to give more information about the debt-rescue plan during his upcoming State of the Nation address on Thursday.

Business Unity South Africa's vice president, Martin Kingston, meanwhile, told Fin24 on Friday that while the business body was in principle in agreement with a proposal to mobilise private and public savings to assist Eskom financially, financial organisations should not be exposed to excessive risk in the process.

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