Eskom Unions Are Said Likely to Accept New Bonus Pay Offer

(Bloomberg) -- Eskom Holdings SOC Ltd., South Africa's power utility, has offered to back down on its refusal to pay employees a bonus in addition to an inflation-beating wage increase to end a deadlock that caused power outages, according to two people familiar with the matter.

Unions are likely to accept the offer, said the people, who couldn't be named because the matter hasn't been finalized yet.

The two major unions at the state-owned company, the National Union of Mineworkers and the National Union of Metalworkers of South Africa, will consult their members over the weekend, said the people. The deal could cost around 5.3 billion rand ($395 million), according to one estimate.

Eskom has offered unions a 10,000 rand ($742) one-time bonus for each worker, and a 7.5% increase this year, followed by 7 percent rises in 2019 and 2020, said the people. The pay rise would further squeeze the utility's budget and raise pressure to increase electricity prices. The company employs about 47,000 people.

The offer will cost Eskom more than 3 billion rand, spokeswoman Dikatso Mothae said by text message on Friday. She confirmed the details of the pay proposal.

Power Cuts

Eskom has had to implement nationwide power cuts during the months of negotiations due to protests that forced generation units offline, after initially saying it was unable to afford to pay any increase or bonus.

A 7.5 percent increase for the first year and 10,000 rand bonus for workers in the bargaining unit could equate to a cost of about 2 billion rand to Eskom, according to Mike Schussler, the chief economist at research group Economists.co.za. Around another 1.6 billion rand and 1.7 billion rand will be added to the wage bill in the next two years.

Power prices would need to rise about 1.3 percent to make up for the first year's increase, Schussler said. “It means for the rest of South Africa we have to pay more for our electricity,” he said.

“We are taking the draft agreement back to our members,” said NUM spokesman Livhuwani Mammburu. “We will make an announcement on August 8 on whether our members have accepted or not.”

Acceptable Offer

Numsa will submit the proposal to its members for consideration, the union said in a statement. Solidarity, the smallest of the three unions at Eskom, has already accepted a previous offer.

“My feeling is that they will take it,” said Solidarity's Deputy General Secretary Deon Reyneke, referring to the other unions. Any new offer would apply to Solidarity, even though they took an earlier offer, he said.

To contact the reporters on this story: Sam Mkokeli in Johannesburg at mmkokeli@bloomberg.net;Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net, Andre Janse van Vuuren, Jacqueline Mackenzie