The Institute of Race Relations (IRR) has sounded the alarm at President Cyril Ramaphosa’s resuscitating the idea of using pension savings to bail out Eskom.

The president addressed this topic in a rare face-to-face session with journalists last week.

In a statement, President lays pensions back on the altar of failing SOEs, the IRR said: ‘The notion of using pension funds to bail out Eskom raised widespread alarm early in Mr Ramaphosa’s Presidency. Officials from the Government Employees’ Pension Fund (GEPF), which holds about a fifth of Eskom’s debt, drew attention at the end of last year to significant obstacles to the mooted “debt-equity swap”. Under such a “swap”, money that Eskom owes to pensioners is never repaid in order to allow Eskom to borrow more elsewhere.

‘President Ramaphosa said he was “very encouraged” at a new proposal to enact such a debt “swap”. Ramaphosa promised that this “is a matter that can still be taken forward. I saw a great deal of merit in the matter, and I didn’t really see it as a matter that could collapse Government Employee Pension Funds.”’

The IRR noted that the late Mike Schussler, an economist whose insights were widely acknowledged in tributes following his recent death, warned against dipping into South African pension funds to bail out state-owned enterprises (SOEs), partly by reference to the Transnet case study. At Transnet, according to Schussler, roughly 70 000 pensioners were effectively ‘robbed’ and condemned to penury by debt-restructuring in a ‘similar process’ to the debt ‘swap’ mooted since 2017.

‘Last year Sifiso Sibiya, chief investor at the GEPF, said that such a debt “swap” would be complicated by allocation rules designed to protect savers from having their savings over-concentrated or exposed to equity risks. Sibiya added that when it came to managing GEPF assets, GEPF pensioners must be “put first in terms of expecting returns”.’

The IRR said: ‘Eskom is in deep trouble and one option is to streamline its procurement while letting in massive private capacity to power a growing South Africa. That way, innovation and voluntary action keep the lights on and the wheels turning in wider circles of higher employment.

‘Another option is to maintain the government’s monopoly on major power generation, while ramifying cadre deployment – which will require that millions of pensioners’ savings are “swapped” away to keep Eskom going. This seems to be what President Ramaphosa has in mind.’

Said Gabriel Crouse, IRR Head of Campaigns: ‘Almost $30 billion in SA pension value was lost during 2020 alone. No more sacrifices can be made at the altar of SOE monopolies, least of all from the shrinking pool of savings ordinary people need to survive in old age.’