Eskom is sacrificing workers benefits and wages to fund bloated primary energy contracts
13 June 2022
The National Union of Metalworkers of South Africa (NUMSA) met with Eskom management under the auspices of the Central Bargaining Forum (CBF) for the third round of wage talks from the 6th to the 8th of June. NUMSA presented a revised offer and reduced its demand from 15% across the board, down to 12% across the board. If Eskom were to grant a 12% wage increase across the board, it would cost 2.1 billion. This includes the costs of benefits such as pension, annual bonus, medical aid, overtime and leave pay for all 28 300 employees in the CBF.
In comparison, Eskom keeps pleading poverty. It claims it cannot afford our wage demands. It has made an offer to increase income differentials instead. They have a staggered approach to deal with this issue. But it has not yet made an offer on the wage increase across the board. Instead, Eskom has made a final offer and it is broken down in the following way:
It is very clear that the strategy that is being used by Andre De Ruyter and the executive management of Eskom, is based on sacrificing workers benefits, pension payouts and wages in order to fund the bloated cost of primary energy. These contracts benefit privately owned coal, IPP and diesel companies and they are escalating year on year at an alarming rate. In comparison, workers’ wages and benefits have remained flat over the last 5 years. The total cost of the wage bill at Eskom, including the generous packages of the executive management has remained flat and has not exceeded R33 billion since the 2017/2018 financial year. We made a detailed presentation to Eskom where we explained why our demands are affordable.
Below are some of the arguments we made:
1. Workers’ wages do not affect Eskom’s balance sheet negatively - There is an institutional refusal by Eskom to reduce the cost drivers at the entity. There are other costs that are responsible for the entity’s spiraling debt levels. Over the past four years, the bargaining unit employees, (28 300 employees in total), wage costs remained flat between R16,9bn and R17.4bn, at most increasing by 2,3%. During FY21/22, despite the unilateral implementation of 1,5% increase on the bargaining unit, total costs declined by R483 million.
2. Primary energy costs are collapsing Eskom - In comparison the cost of Primary energy has gone up. Primary energy is a combination of coal costs, the cost of Independent Power Producers (IPP’s) and the cost of diesel for the Open Cycle Gas Turbines (OCGT’s). Primary energy costs increased from R85 billion in 2017/18 to R116 billion for the 2021/22 financial year. That is a R31 billion increase over the past four years. Interim results released on the 15 December 2021 have forecast a further R12 billion increase from R116 billion to R128 billion for the financial year ending 2022.
3. Eskom bailed out Duvha Seriti/South32 but refuses to bail out employees - On its own, the Duvha Seriti/South32 Coal contract increased by 104%, from R269,80 per ton to R550 per ton translating to R8,4 billion increase over four years. Eskom cited financial distress of Seriti/South32 emanating from the operational costs (which includes labour costs), as the reason to grant this exorbitant increase. But, for selfish reasons, the Eskom management of De Ruyter, does not want to respond to its own employees who are in dire financial distress by offering a meaningful increase.
4. Eskom management is inefficient and continues to overspend – Eskom overspent on diesel OCGT’s by whopping R9 billion for the 2021/22 financial year. The total costs spent on diesel powered OCGT’s (Eskom and IPPs), amounts to R12.6bn in one single year. This happened while NERSA limited the costs to R3.5bn since it is financially unsustainable to use OCGT’s extensively. These costs have exceeded the approved costs by NERSA by a whopping 356%. In Eskom’s admission, the extensive use of OCGT’s beyond the NERSA approval to alleviate generation plant constraints, is financially unsustainable – and has direct and substantial impact on Eskom’s profitability. Eskom continues to overspend on Diesel OCGT’s. As of 5 June 2022, Eskom has already spent approximately R5bn during the first two months of financial year 2022/2023. This then begs the question, who is benefitting from these diesel contracts because since the new board took over in 2018, Eskom has spent an eye-watering R43 billion on OCGT’s.
At the same time, workers are collapsing under the burden of the high cost of living, fuel price escalation and above inflation Eskom tariff increases. We have proven in our submissions to the CBF, that Eskom can afford our wage demands. The problem is that the current management led by the GCEO Andre De Ruyter is grossly inefficient, and is wasting money, but it refuses to deal with its cost drivers.
De Ruyter is undermining the Central Bargaining Forum - We must condemn Andre De Ruyter for engaging workers’ directly on their demands. De Ruyter is not engaging in the CBF but he is soliciting mandates directly on email. If he continues, we will collapse the CBF and bring workers to his house to negotiate directly with him on his expensive manicured lawns! He must stop undermining the central bargaining forum with internal communication.
Eskom made its offer final and it is unwilling to shift from its position. We need to seek a new mandate from members on the way forward. NUMSA members will have to decide on how to proceed on Eskoms staggered proposal to resolve wage differentials. The deadline to submit our response to the CBF is Tuesday 14 June. We will meet again for a fourth round of talks from the 21st to the 22nd of June.
Aluta continua!
The struggle continues!
Issue by Irvin Jim, NUMSA General Secretary, 14 June 2022
