Busa, Cosatu putting in the miles for Ramaphosa to announce Eskom pact

By Antony Sguazzin

(Bloomberg) – South Africa’s main business lobby said it’s working with labour unions and other social partners on enabling President Cyril Ramaphosa to announce a pact to rescue the debt-stricken state power utility in his state-of-the-nation address next week.

Representatives of Business Unity South Africa and the Congress of South African Trade Unions, the nation’s biggest labour federation, said significant progress has been made in talks with the government on Eskom’s R454bn ($31bn) debt burden.

“We all recognise pragmatically what needs to be done,” Busa Vice Chairman Martin Kingston said in an interview. There’s an objective to “ensure that all parties are on the same page as to what is practical and what is possible”.

Cosatu has proposed that Eskom’s debt be cut to R200bn by using funds from state development institutions and the Public Investment Corporation, which oversees R2.13trn of mainly government worker pensions.

Busa has insisted that any arrangement respect the principle of adequate reward for capital put at risk, that the mandates of the institutions concerned aren’t breached and the fiduciary duty of trustees isn’t compromised.

Ramaphosa is scheduled to deliver his annual address to lawmakers on February 13.

“We would hope that the president could refer to mechanisms – short-, medium- and long-term” – to rescue Eskom, he said. There is “the issue of ensuring we can mobilise sufficient financial resources to fund projects going forward and alleviate the strain on the balance sheet”.

Framework agreement

It’s likely that a “framework agreement” will be completed and signed within the next “couple of days”, said Matthew Parks, Cosatu’s parliamentary co-ordinator.

The private sector is unlikely to risk more capital on Eskom unless there is a major restructuring of its balance sheet and operating model, Kingston said. Much of Eskom’s current debt is guaranteed by the government.

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