The Public Investment Corporation (PIC) on Thursday confirmed that neither it nor any of its clients, including the Government Employees Pension Fund (GEPF), had been consulted about using the GEPF’s financial resources to help alleviate some of State-owned power utility Eskom’s debt.
The PIC said it was well aware of the risk that Eskom poses to the South African economy and to the funds invested on behalf of its clients.
This followed after the Congress of South African Trade Unions (Cosatu) on February 3 proposed that R250-billion of State employees’ pension money, managed by the PIC, should be used to help pay down some of Eskom’s R454-billion debt.
Cosatu had, in the meantime, put the brakes on talks on the proposed social compact between government, the PIC and development finance institutions. This was, according to trade union Solidarity, owing to growing disquiet by organised labour about the implications of such a move.
Solidarity on Tuesday sent a letter of demand to the GEPF and the PIC requesting that the trustees and boards of these institutions not accept any proposals related to providing financing to the power utility.
The Health and Other Services Personnel Trade Union of South Africa wrote a letter with similar sentiments to the GEPF chairperson earlier this week.
The PIC stated on Thursday that its investment function was governed by specific terms included in each client’s investment mandate and said its investment function was also designed to further each client’s investment goals.
In discharging its fiduciary duty to its clients, the PIC must assess any investment proposal in line with client mandates.
“Every decision the PIC takes is based on the merits of each investment proposal and aims to generate risk-adjusted financial and social returns for our clients. Should the PIC receive a proposal to further invest in Eskom, the PIC will follow its governance process as outlined in the investment mandates to arrive at a decision.
“We believe a long-lasting solution should address, among others, Eskom’s growing debt burden; the impact of Eskom’s power generation business on the environment; governance reforms; operational effectiveness; improving procurement practices; and ensuring a reliable supply of power to the economy,” the asset manager stated.
The PIC said it was ready and keen to engage with various stakeholders to find a suitable and sustainable solution for the systemic risk posed by Eskom.
Such a solution must, however, be in line with prudent management of client assets.
“The PIC is obligated to always act in the best interests of its clients, while giving due regard to the national interest,” it stated.