A proposal by South Africa’s biggest labor-union federation to rescue debt-stricken Eskom Holdings with government workers’ pensions would amount to little more than a shifting of contingent liabilities, according to BNP Paribas South Africa.

The Congress of South African Trade Unions’ proposal that state institutions including the Public Investment Corporation take over R254-billion of Eskom’s R454-billion debt pile is a concern because the government will still bear ultimate responsibility, said Jeffrey Schultz, a senior economist at the lender.

“The government employees pension fund is a defined-benefit scheme,” Schultz said. “Even if you are implementing big losses by taking significant portions of Eskom’s debt onto the PIC’s books, ultimately that liability is going to rest with the state. And so, we’re calling it a contingent liability by stealth, we’re just moving the contingent liability around,” he said.

Eskom, described by Goldman Sachs Group as the biggest threat to South Africa’s economy, doesn’t generate enough cash to service its debt and is surviving on government bailouts after years of mismanagement. While government guarantees stood at R350-billion in February, President Cyril Ramaphosa’s assurance that it won’t let the company fail has effectively backstopped all of its debt.

The complexities of reorganizing Eskom’s obligations mean it could take as many as two years to finalize, Schultz said. A report by Freeman Nomvalo, the utility’s outgoing chief restructuring officer, that’s due in the coming weeks will likely deal with some of the intricacies, he said. It’s unclear whether Nomvalo’s report will consider Cosatu’s proposal.

Eskom produces about 95% of South Africa’s electricity, but has been forced to institute rolling blackouts as its old and poorly maintained plants struggle to keep pace with demand. Cutting 2 000 MW from the national grid costs the economy about R1-billion rand a day, Schultz said.

While BNP Paribas sees gross domestic product growth averaging 0.5% in 2020, prolonged blackouts could result in a 30% to 40% chance of a recession, he said.