The spectre of a strike at power utility Eskom loomed large after it declared a dispute with its three labour unions which, if not reconciled by the Commission for Conciliation Mediation and Arbitration would give rise to industrial action and threaten South Africa's economic recovery. Photo: Bloomberg
The spectre of a strike at power utility Eskom loomed large after it declared a dispute with its three labour unions which, if not reconciled by the Commission for Conciliation Mediation and Arbitration would give rise to industrial action and threaten South Africa's economic recovery. Photo: Bloomberg

Spectre of Eskom wage strike looms over economy after dispute declared

By Banele Ginindza Time of article published Jun 3, 2021

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THE SPECTRE of a strike at power utility Eskom loomed large after it declared a dispute with its three labour unions which, if not reconciled by the Commission for Conciliation Mediation and Arbitration (CCMA) would give rise to industrial action and threaten South Africa's economic recovery.

Eskom confirmed yesterday that it had declared a dispute in the central bargaining forum after failing to reach a wage agreement with the National Union of Mineworkers (NUM), the National Union of Metalworkers of SA (Numsa) and Solidarity.

The parties have been polarised for weeks on the negotiating table with the major unions NUM and Numsa asking for a 15 percent wage increase and Solidarity 9 percent while Eskom stood unshaken with a 1.5 percent offer.

The utility is buckling under a R401bn debt pile and depends on government bailouts to keep the economy functioning.

Eskom spokesperson Sikonathi Mantshantsha confirmed yesterday that the utility was hard-pressed and could not afford the union's demands.

He pointed out that the average annual wage for more than 35 000 workers at Eskom was R737 000 amid a depressed economy.

A protracted dispute could hurt gross domestic product and investor sentiment.

The South African Reserve Bank last month expressed optimism over the economic outlook, with gross domestic product now expected to expand 4.2 percent in 2021, up from 3.8 percent, despite the threat of a third wave of Covid-19.

Last month, ratings agencies Fitch and S&P Global Ratings left South Africa's ratings unchanged at BB, but S&P warned that it “could lower the ratings if South Africa's economy fails to recover during the forecast period and fiscal financing or external pressures mount”.

It said this could arise from further financing risks emanating from contingent liabilities, including public electricity utility Eskom, or tightening financing conditions increasing the government's interest burden as a proportion of revenue.

However, NUM's Khangela Baloyi said yesterday that Eskom's declaration of a dispute amounted to war, which they would meet head-on.

“We are now going back to our initial demand of 15 percent,” he said.

The unions had earlier in the process shifted their demands to 12 percent and 10 percent respectively for the major unions.

Numsa spokesperson Phakamile Hlubi-Majola said Eskom's position was contemptuous because its workers were classified as essential workers and therefore unable to go on strike without an extensive arbitration process.

She argued that the National Energy Regulator of South Africa (Nersa) had last year under multi-year price

determination 4 directed that Eskom could pay workers an increase of up to 5.4 percent, which she said the utility had not come close to. Yet the power utility had granted coal companies an adjustment of 16 percent increase last month against the regulator's recommendations, Hlubi-Majola said.

“It is a bold face lie that our demands are not affordable, Eskom last year spent R73 billion on coal and yet workers conditions have not improved over the past three years,” she said.

The unions are now waiting on the CCMA to allocate a date for starting the arbitration process.

Izak Odendaal, an investment strategist at Old Mutual Wealth Group, said the tussle needed to be looked at in the broader context of the utility's restructuring, pointing out that the utility's finances were essentially guaranteed by the state.

“Eskom is critically important, we need it to be stablilised to continue to provide the service it does to the rest of the economy,” he said, outlining the boomerang effect of a high bill that would still come back to the taxpayer.

“Eskom, like the government, is overstaffed and it has been loss-making year after year. It would be difficult for it to give huge wage increases. In a depressed economy, with the recent spike in unemployment fogures, workers should feel lucky about the job opportunities they still have,” he said.

Eskom also said yesterday that the utility had depleted its energy reserves in the face of high demand as large parts of the country experienced a cold front. It has since implemented stage 2 load shedding for various parts of the grid.

Anchor Capital said in a note that local market sentiment was further dented after Eskom resumed the rotational power cuts.

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