Trouble looming at Eskom

Trouble is looming at Eskom, with the utility’s three recognised unions rejecting a revised offer for a wage increase of 5.25%. 

The National Union of Mineworkers (NUM), National Union of Metalworkers of South Africa (Numsa), and Solidarity rejected the offer made at the third round of negotiations last week. 

However, Eskom said the negotiations had progressed well, with “significant moves” being made. 

NUM and Numsa revised their demands to 11% and 12%, respectively, while Solidarity revised their demand to 9.5%. 

Other demands from the unions include

  • Housing allowance to be raised to R7,000, and employees to be allowed to buy houses anywhere in the country;
  • Medical aid to shift to 80% (20% contribution by employees);
  • Cellphone allowance of R1,000;
  • R1,500 electricity allowance;
  • Once-off R1,500 essential worker or danger allowance, as well as a separate voltage work allowance on a sliding scale;
  • Performance bonus set at 25% of annual salary;
  • R20,000 study benefit per child; and
  • R10,000 car allowance through Eskom’s so-called vehicle X-scheme.

NUM and Numsa initially demanded an increase of 15%. Eskom’s first offer was 3.75%. 

Despite the gulf between the unions’ demands and Eskom’s offer, both sides are optimistic about a resolution being found at the fourth round of negotiations on 13 and 14 June. 

These wage negotiations come as the company struggles to produce enough electricity and demand is expected to increase during winter – pushing load shedding up to stage 8.

However, Numsa said their workers at Eskom are struggling to make ends meet and will struggle further due to the country’s high inflation and rising interest rates. 

The union has rejected Eskom’s implementation of “austerity measures”, with allowances going unchanged since 2016/2017. 

“The workers at Eskom refuse to continue to suffer while financial mismanagement continues at the utility,” the trade union said to the SABC

The pitfalls of rising wages

Dawie Roodt
Dawie Roodt, chief economist at the Efficient Group

“Eskom is completely bankrupt. It has been operationally and financially run into the ground. It does not work anymore,” chief economist at the Efficient Group Dawie Roodt told delegates at PIF 2023.

He explained that around 40,000 people work at Eskom with an average salary of R70,000 per month.

“Last year, Eskom employees received a 7% increase. It is irresponsible. These workers are already overpaid,” he said. “You cannot give Eskom employees a 7% increase when the company is bankrupt.”

Roodt previously explained that the best way to handle Eskom is to treat it like a private sector company and place it into business rescue.

That would mean tens of thousands of Eskom employees will and must lose their jobs.

“It is the only way you will save Eskom and the country. You have to fix it the same way you will fix a private sector company,” he said.

Xhanti Payi, senior economist at PwC South Africa

Such large wage increases are an inflationary pressure themselves and may thus result in inflation staying higher for longer, said senior economist at PwC South Africa Xhanti Payi.

Payi also noted that, with wage demands above inflation, it is unlikely that the Consumer Price Index (CPI) will move lower in the short term. 

Disposable income has been declining in real terms and will result in high wage demands, such as the Eskom unions’ demands for a 9% to 12% increase. 

Inflation, particularly core inflation, is proving to be sticky, with the South African Reserve Bank’s (SARB) rate hikes having little effect on CPI. 

This is because structural economic issues, such as load-shedding and inefficient logistics services, drive South Africa’s inflation. These issues cannot be solved with interest rates. 


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