South Africa: Talks to bail out Eksom with government pensions sidelines public fund manager

Discussions over a potential bailout of ailing South African energy firm Eksom using government pension savings have excluded the Public Investment Corporation (PIC) which manages the funds. 

The high-level talks between the government, labour unions and business representatives have effectively relegated PIC to a bystander status, despite the potentially disastrous impact a proposed bailout would have on the asset manager. 

Under the current proposal, R 250bn ($17bn) would be taken out of the R1.8trn pension fund belonging to current and retired government employees, which PIC manages. The deduction amounts to a potential loss of 13.8% if Eksom fails to pay back the money. 

PIC is Africa’s largest asset manager, controlling savings on behalf of the Government Employees Pension Fund (GEPF) and the Unemployment Insurance Fund, among other public sector clients.

The idea of a bailout was first mooted by The Congress of South African Trade Unions (Cosatu) and would help to pay off some of Eksom’s R560bn debts. 

The state-owned energy firm, which supplies 95% of South Africa’s electricity, has been struggling to remain solvent for years. The strain on Eksom’s resources has also lead to rolling blackouts, known as load shedding, in a bid to cut costs and prevent the outdated network from becoming overloaded. 

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