Eskom’s two-year, above-inflation wage settlement with trade unions will not affect its future tariff trajectory because it is making savings in other areas, such as diesel consumption, says Khulu Phasiwe, spokesman for the power utility.
Eskom has agreed to give lower-paid employees an increase of 10% and higher-paid employees 8.5% in each of the next two years. The housing allowance has increased by R260 to R2,860 a month in the first year and by R140 to R3,000 in the second year.
Eskom employed 47,978 people at the end of March, but said in its last annual review numbers would fall to 36,768 by 2020/2021 through natural attrition, early retirement and, possibly, voluntary retrenchments.
The problem illustrated in the mining sector is that above-inflation wage increases tend to hasten job cuts.
Eskom’s settlement is both above headline consumer price inflation of 6.3% and the 7.06% average annual increase in manpower costs allowed by the National Energy Regulator in its multiyear price determination decision for Eskom’s tariff increases from 2013/2014 to 2016/2018.
"Eskom will absorb the costs related to the wage increment by continuing with its cost-cutting measures, which have been ongoing for three years now," Phasiwe says.
"Last year we achieved a cost saving of R17.5bn against a target of R13.4bn. This financial year, Eskom had a sharp decrease in diesel expenditure due to the improved performance of our baseload power stations.
"In addition, Eskom has already had a 12.2% increase in its international sales due to the acute power shortages that continue to affect some of our neighbouring states. All these measures are not dependent on tariff increments. Moreover, the tariffs for the period starting from 2013 to 2018 were approved in 2012 already."
Talks over a two-year wage deal kicked off in May, with Eskom’s two biggest unions, the National Union of Mineworkers (NUM) and the National Union of Metalworkers of SA (Numsa), opening with a demand for annual wage increases of up to 20% against Eskom’s initial offer of 5%. The unions also wanted a R5,000/month housing allowance and the end of disparity between wages paid to white and black workers.
Deadlock was reached by mid-July when Eskom refused to budge from its increased offer of 7%. On August 10 some NUM members went on strike, defying Eskom’s insistence that any strike would be illegal because power generation is defined as an essential service in the Labour Relations Act. The number of people on strike ranged from the unions’ estimate of 15,000 to Eskom’s of only 1,500.
Electricity services were not disrupted and the strike lasted only two days before agreement was reached on a final settlement, which looks close to the unions’ July demands. By the weekend the NUM and Solidarity had signed but Numsa had not, though it was expected to do so.
"Wage negotiations are by their nature a give and take process, and because we were negotiating in good faith, we were able to adjust our wage offer to the levels ultimately settled at," Phasiwe says.
"In the same vein, the unions had also reduced their initial wage demand to between 8% and 10%. That hardly constitutes capitulation on either side."
NUM deputy general secretary William Mabapa says the NUM did not get everything it asked for but reached a point where it was reasonable to settle. There would be further negotiations in the next three months over its other demands.
Eskom says workers who did not report for work during the strike will face internal disciplinary action. Mabapa says some of those off work during the strike were not striking but had other reasons. The details would be known this week and the NUM would present motivations and reasons for mitigations at disciplinary hearings. It will not pre-empt these hearings in the media, Mabapa says.
The NUM did not intend to challenge the concept of essential services, but the way Eskom was implementing it. Essential services are those that, if discontinued, will threaten human lives. Eskom considered all its employees were doing essential services but the NUM doesn’t believe human lives will be threatened if head office employees go on strike.
Mabapa says the NUM would like a minimum services agreement at Eskom that would clarify which jobs are essential and which are not.