Vavi’s federation condemns use of pensions to bail out SOEs

Johannesburg – Newly-formed South African Federation of Trade Unions (Saftu) has raised concern over the bailout of failing state-owned enterprises (SOEs) with government employee pensions.

The federation, led by Zwelinzima Vavi, issued a statement on Thursday following a report by Moneyweb that the Government Employees Pension Fund (GEPF) has paid out billions to Eskom through the purchase of the power utility's bonds.

The report indicates that the GEPF purchased an additional R8.3bn in Eskom bonds in 2016 and by March 2016 held R73.7bn worth of bonds. The GEPF has financed the majority of Eskom’s debt, Moneyweb reported.

Fin24 previously reported that Treasury also intends to bail out loss-making airline South African Airways (SAA) with the pensions. Treasury is considering the Public Investment Corporation (PIC) to refinance SAA, which manages the GEPF as an option.

READ: PIC in the mix of options to fund loss-making SAA

Saftu spokesperson Patrick Craven explained that the GEPF holds the wealth of public servants, which is intended for themselves and their dependants when they resign, retire or die.

“If however the PIC pays out GEPF funds to fill massive holes of debts at loss-making SOEs like Eskom and SAA, which are unable to raise loans on the market in the light of the government being downgraded by the ratings agencies, the GEPF will inevitably eventually become unsustainable,” said Craven.

In turn, if the GEPF is unable to pay out pensions and benefits to members and their dependants, Treasury will have to bail out the fund itself.

'Taxpayers will become cash cows'

“Thus indirectly the taxpayers will become cash cows, indirectly injecting millions of rands via the GEPF into the pockets of SOEs which have been bankrupted by corruption and mismanagement,” he said.

“This diversion of funds will then inevitably lead to further delays in implementing the national health insurance scheme, comprehensive social security, free education, infrastructure maintenance, and cuts in the existing levels of spending on essential services.”

ALSO READ: Don't tap into PIC for SAA bailout – union

The National Union of Public Service and Allied Workers previously implored Treasury not to consider using the PIC to bail out SAA.

General secretary Success Mataitsane said that using the PIC to refinance SAA is only a “short-term solution”.

Sharing Craven’s views, he explained that the depletion of GEPF funds would leave pensioners struggling to cover “unexpected” expenses.

READ: SOEs are being used to loot taxpayers' money – Motlanthe

Former president Kgalema Motlanthe on Thursday also expressed concerns over SOEs that are "looting" taxpayers’ money.

Motlanthe said there should be “public accountability” for the management of SOEs, News24 reported.

Read Fin24's top stories trending on Twitter:

ZAR/USD
17.43
(-0.64)
ZAR/GBP
22.94
(-0.93)
ZAR/EUR
20.67
(-0.58)
ZAR/AUD
12.53
(-0.52)
ZAR/JPY
0.17
(-0.68)
Gold
2048.60
(+0.67)
Silver
27.62
(+2.94)
Platinum
980.00
(+1.72)
Brent Crude
45.33
(+1.67)
Palladium
2186.52
(+1.09)
All Share
57798.18
(+0.29)
Top 40
53444.84
(+0.31)
Financial 15
10078.39
(+1.50)
Industrial 25
76325.03
(+0.21)
Resource 10
59804.27
(+0.02)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 886 votes
It depends on how the funds are used.
74% - 5856 votes
No. We should have gotten the loan elsewhere.
15% - 1177 votes
Vote