The plan proposed by the Congress of South African Trade Unions (Cosatu) to use funds in the order of R250bn from Development Bank of Southern Africa (DBSA), the Industrial Development Corporation (IDC) and the Government Employees Pension Fund (GEPF) to pay down Eskom’s R450bn debt is not only reckless, but not possible.
This is according to Stuart Theobald of Intellidex in an analysis published on BusinessLive.
The BDSA has an exposure limit of R500m to any government entity, although its board recently made an exception to this to accommodate the R3.5bn loan to South African Airways. At most, says Theobald, the DBSA might be able to offer exposure of R9.2bn – but some of this is already committed to Eskom.
The IDC is not permitted to accept exposure of more than 25% of its capital to a single industry. This would amount to some R24bn. However, it is already committed to a number of power projects, so the amount available to Eskom is likely to be less than half of this figure.
As for the GEPF, while it holds assets worth over R2 trillion, it already holds some R85bn in Eskom bonds. Prudent risk management would dictate caution about accepting any more.
Even if the GEPF doubled its Eskom exposure, says Theobald, the three institutions could not together raise much more that R100bn.
‘It is astounding that the plan has gone as far as it has, despite this obvious maths,’ he remarked.