Cape Town – The Public Investment Corporation (PIC) has again hit back at criticism of its recent R5bn loan to Eskom, saying if it did not extend the loan the power utility risked a default that would have “collapsed the domestic economy”.
The PIC, which manages the assets of state pensioners via the Government Employees Pension Fund (GEPF), came in for criticism from trade unions earlier in the month over whether the loan was a solid investment.
On Tuesday the PIC said in a statement that “false, misleading information continues to be presented to the media and into the public domain” around the loan.
“This creates unnecessary anxiety amongst pensioners, GEPF members and their dependents, and public sector employees about potential risks to their pensionable savings and benefits,” it said.
It noted that the loan had to be repaid within a month, was backed by a state guarantee and would earn the PIC “above the benchmark” interest rates.
The statement added that the GEPF was a defined benefit fund, which means it is guaranteed by the government.
‘Best interest of the South African economy’
The PIC argued it was in the interests of all South Africans that that the loan to the cash-strapped power utility was extended, despite criticism from trade unions including The Public Service Association.
“When the PIC board approved the bridging finance to Eskom, it took into account the best interest of the South African economy, the interests of its clients and the fact that the PIC was acting in accordance with the GEPF investment mandate,” it said.
Without this investment, Eskom would have been unable to service its debt which would have led to a default and the breaking of its debt covenants with financial institutions during the first week of February 2018. This would have resulted in a cross default of all government obligations with catastrophic consequences that would have collapsed the domestic economy.”
Eskom will have to pay back the loan, plus interest in early March.
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