SCENARIOS-What comes next in S.Africa’s Eskom labour fight

By Jon Herskovitz

JOHANNESBURG, July 2 (BestGrowthStock) – South African power utility
Eskom [ESCJ.UL] and its biggest union held talks on Friday under
the threat of a strike next week that could cut power to the
continent’s largest economy as it hosts the soccer World Cup.

The following is a look at what may come next in the labour
dispute, which could damage manufacturing and mining.

ESKOM PRESSURED TO REACH A DEAL

The state-owned utility is likely facing pressure from the
government to reach a deal that averts a strike. The ruling ANC,
which has a long-alliance with organised labour, does not want
to upset a major support group. It also does not want to see an
embarrassing power disruption during its hosting of the World
Cup, which is one of the biggest events in the country after the
end of apartheid 16 years ago. The Cup ends on July 11.

ESKOM LIKELY TO BEND ON HOUSING ALLOWANCE

The workings of a deal have emerged in the past few days
with Eskom and the union narrowing differences on wages — with
Eskom offering an 8.5 percent increase and the National Union of
Mineworkers (NUM) seeking 9 percent. Eskom will likely have to
seek a compromise that is tilted in favour of the union for its
demand of a 2,500 rand ($323) housing allowance, analysts said.

According to Statistics South Africa, the average monthly
salary for workers in the country including overtime and
benefits was about 6,400 rand, while the average gross salary
for workers in the electricity, gas and water supply industries
was about 22,300 rand.

THE LIGHTS STAY ON, FOR NOW

Eskom has said a strike would be illegal because it would
threaten an essential service and the government would be loathe
to allow a work stoppage that hurts its industries and worries
overseas investors about the prospects for the economy.

The ANC, however, must walk a fine line because it would be
dealt a heavy political blow if it cracked down too harshly on
striking workers.

The NUM and two unions involved in the negotiations in total
represent about three-quarters of Eskom’s 32,000 employees. They
have floated the idea of a work stoppage for what they see as
“non-essential” employees for the delivery of electricity. Such
a walkout, which may be deemed by government regulations as
illegal, would put the ANC in a bind. It could allow for such a
work stoppage because it would risk political support if it
tried to force the workers to return.

Eskom, which has planned for contingencies, has said supply
would be still affected within days of a massive labour action.

ESKOM TAKES A MARKET HIT, CONSUMERS PAY MORE

The cash-strapped utility has been struggling to raise all
the funds it needs to build new power plants to prevent an
imminent power shortage and is still facing a 190 billion rand
($24.57 billion) funding shortfall over the next seven years.

Company officials have said they would exceed the amount set
by regulators for personnel expenditures by about 1 billion rand
if they met the union’s demands.

Increased payments for personnel will not look good in the
eyes of rating agencies and creditors as the utility seeks
capital to build the power plants the country needs to meet its
energy needs.

The bill for the higher wages could eventually be passed on
to consumers and add to inflationary pressures in the economy
that is recovering from its first recession in 17 years.
(Additional reporting by James Macharia; Editing by Giles
Elgood)

SCENARIOS-What comes next in S.Africa’s Eskom labour fight