SAFTU condemns possible use of PIC funds to bail out bankrupt SOEs

The South African Federation of Trade Unions is shocked at Finance Minister Malusi Gigaba’s statement to the COSATU Central Executive Committee that that he cannot guarantee that the government will not attempt to use the funds of the Public Investment Corporation (PIC) to capitalise state-owned companies and other projects.

This confirms earlier reports that the government wants to use workers’ money from their pension and provident funds to bail out loss-making state-owned enterprises, in particular South African Airways (SAA), which reportedly needs almost R10 billion to stabilise its cash flow and guarantee no loss of jobs. 

The minister’s statement contradicts an assurance by deputy president Cyril Ramaphosa’s to MPs in June that “What one can say clearly is that the Government Employees’ Pension Fund (GEPF), which is managed by PIC, will always make sure that funds of contributors are safe and well-managed.” 

Bailing out SOEs which have been bankrupted through mismanagement and corruption cannot possibly amount to “safe and well-managed” use of the funds. 

If the report is accurate, it also means the minister either lied or willfully misled parliament when, in response to a question, he denied that he was investigating the possibility of SAA seeking funding from the PIC.

The GEPF has already paid out billions of rands to the equally debt-ridden Eskom. For the year ending March 2016 – the latest available reported figures – it increased its ownership of Eskom debt through the additional purchase of R8.3 billion of Eskom bonds. The GEPF thus held R73.7 billion of bonds and bills in Eskom, making it the largest single owner of Eskom debt by a long way.

As SAFTU said on 25 May 2017, when the possibility of using more PIC funds to save SAA was first reported: “The GEPF holds the money contributed by public servants to provide them and their dependents with an income when they resign, retire or die. The fund  is managed by the PIC, which is obliged to ensure that this money is invested responsibly and wisely. 

“If however the PIC pays out GEPF funds to fill massive holes of debts at loss-making SOEs like Eskom and SAA, which are unable to raise loans on the market in the light of the government being down-graded by the ratings agencies, the GEPF will inevitably eventually become unsustainable.”

If indeed the GEPF itself does become unsustainable, the Treasury will then have to bail it out, because it is a guaranteed benefit fund which legally must pay out the full pensions and benefits that its members and dependents are entitled. So indirectly, the tax-payers will become cash cows, injecting millions of rands, via the GEPF, into the pockets of bankrupt SOEs. 

This diversion of tax revenues will then inevitably lead to further delays in implementing the national health insurance scheme, comprehensive social security, free education, infrastructure maintenance, and to cuts in the existing levels of spending on essential services. It will therefore be an assault of the living standards of the poor and the goal of a better life for all! 

And this attack on the living standards of South Africans will have been carried out by a minister who claims to want ‘radical economic transformation’, proving yet again that this is nothing but empty rhetoric.

SAFTU therefore supports the call by its affiliate NUPSAW for the National Treasury to refrain from using the PIC to re-finance SAA and not to be trapped in a system dominated by cronyism and corruption.  

This latest move by Gigabe further justifies the submission by SAFTU unions for a Section 77 notice at Nedlac which demands a clear plan from government to change direction and plot a new growth path to change the structure of the economy and ensure redistribution of wealth, land, and create opportunity for all.  It further demands that the crisis in the education system, health service and public transport be fully addressed. 

This is what real ‘radical economic transformation’ means!

There must be an immediate moratorium on any further use of GEPF funds by the PIC until the boards of these loss-making monoliths have been sacked and replaced by democratic and accountable representatives of the community, workers and the country.

We are mobilising for a full-blown strike in November if government maintains the status quo whilst mouthing hot air about c transformation. We have to defend our socialist policies for the full implementation of the Freedom Charter because they are only way to provide a way out of the misery and despair which the majority of South Africans are facing every day.

Statement issued by Zwelinzima Vavi, SAFTU General Secretary, 2 September 2017