With a letter of demand addressed to the Government Employees Pension Fund (GEPF) and the Public Investment Corporation (PIC), labour union Solidarity instituted legal steps to stop the exchange of Eskom debt for Eskom shares, on June 4.

In doing so, Solidarity demands that plans by the PIC to use government pension funds to fund Eskom, be scrapped.

This comes after the PIC indicated that it was considering the exchange of bonds held by it on behalf of the GEPF for shares in Eskom, thereby reducing Eskom’s debt burden, Solidarity notes.

Solidarity states that it is strongly opposed to such a move, or the exchange of bonds for shares, specifically in Eskom, as the union believes it will be a bad investment that will not benefit GEPF members and pensioners whose funds are invested by the PIC.

Solidarity says such action will merely be an exchange of income-bearing bonds for worthless shares that will not generate any income to the PIC or GEPF for the next decade and longer.

“In practical terms, this simply means that about R200-billion of Eskom’s debt will be written off at the expense of public servants’ retirement security,” Solidarity says in a statement.

Solidarity public sector organiser Zirk Gous says it is “outrageous” to think the PIC will deal with its members’ pension money so irresponsibly. “GEPF members and pensioners will suffer economic harm because of this. They have worked hard for this nest-egg, which the PIC now handles so imprudently.”

In the letter of demand, Solidarity points out to the trustees their fiduciary duty, and also that individual trustees and board members will be held personally liable if they fail to fulfil their fiduciary duty.

Solidarity also highlights that the mandate of the GEPF and the PIC are to act in the best interests of the members of the pension fund. “It would not be in the best interests of the GEPF members to exchange Eskom debt for shares that will not yield an income.”

Solidarity legal services head Anton van der Bijl says the union will not hesitate to institute further legal action against the GEPF and the PIC.

“This would just be another way of using ordinary people’s retirement money without their permission to fund a struggling state enterprise. We will do everything in our power to stop this unscrupulous exploitation.”