Today's Labour News

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eskomBusinessLive reports that according to global bank BNP Paribas, Cosatu’s debt rescue plan for Eskom, which has already received support from the public enterprises ministry and the president, should be broached with caution as it was likely to amount to little more than an added “contingent liability by stealth” on the state’s finances.  

The labour federation’s proposal to hive off R250bn in Eskom debt, and place it into a special purpose vehicle supported by the Public Investment Corporation (PIC) and other government development finance institutions, was “not the way to go” said BNP Paribas senior economist Jeffrey Schultz.  The PIC manages almost R2-trillion in funds on behalf of the Government Employees Pension Fund (GEPF).  The use of such funds might eliminate Eskom’s burden, by shifting the debt to the PIC’s books, but ultimately that liability was going to rest with the state, noted Schultz.  This was because the GEPF was a defined benefit fund, meaning pensioners got a set payout regardless of the fund’s performance and the state must make up any losses owned to beneficiaries.  “We are calling it a contingent liability by stealth, it’s just moving the contingent liability around ... [the state] needs to deal with this in a much more careful fashion,” said Schultz.  Contingent liabilities are the risks posed by commitments that may result in future financial obligations.  “The notion of prescribed assets jumps to mind and this is a slippery slope,” Schultz said of Cosatu’s plan.  SA needed to be “signalling the right policies” to attract investment rather than those that detracted from it, noted Schultz.

  • Read the full original of the report in the above regard by Lynley Donnelly at BusinessLive


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