A plan proposed by South Africa's biggest labor group to get pension funds and state lenders to refinance part of the state power utility's gargantuan debt faces hurdles that may be impossible to overcome.
Under the Congress of South African Trade Unions' so-called social compact, Eskom Holdings SOC Ltd.'s 454 billion rand ($29 billion) of debt will be cut to 200 billion rand, with the balance transferred to a specially created entity. That will be funded by the Public Investment Corp., which manages civil servants' pensions, private retirement funds, the Development Bank of Southern Africa, the Industrial Development Corp. and other investors.
While the government and lobby group Business Unity South Africa have welcomed COSATU's plan, the main opposition Democratic Alliance and trade union Solidarity have threatened court action because they say it'll put workers' savings at risk. The Public Servants Association, which represents more than 237,000 state employees, has also voiced opposition to the proposals. The standoffs could take years to resolve.
COSATU, which is part of the nation's ruling alliance and represents 1.8 million workers, has also said the rescue plans hinges on Eskom and the government agreeing to a range of preconditions that will be legally problematic to meet.
Some potential sticking points include: