Unions fear jobs losses under plan to split South African electricity provider

President Cyril Ramaphosa wants to break the company into three distinct entities

Steam rises from the cooling towers of Matla Power Station, a coal-fired power plant operated by Eskom in Mpumalanga province, South Africa. Photograph: REUTERS/Siphiwe Sibeko/File Photo

Steam rises from the cooling towers of Matla Power Station, a coal-fired power plant operated by Eskom in Mpumalanga province, South Africa. Photograph: REUTERS/Siphiwe Sibeko/File Photo

 

Trade unions in South Africa have vowed to oppose the government’s recent decision to split Africa’s largest electricity producer into three separate entities, as part of its plans to turnaround the debt-laden power utility.

In his state-of-the-nation address last Thursday South Africa’s president Cyril Ramaphosa announced that the state-run business would be broken up into three distinct companies that will focus on power generation, transmission and distribution. The new entities will still be controlled by Eskom Holdings.

Mr Ramaphosa told parliament in Cape Town that Eskom currently has the potential to “severely damage” the country’s economic and social development ambitions if drastic action were not taken to turn around its fortunes.

“We need to take bold decisions and decisive action,” he said. “The consequences may be painful, but they will be even more devastating if we delay.”

South Africa’s government has acknowledged that Eskom has racked up debts of around 419 billion rand (€27.2 billion) in recent years due to corruption, mismanagement and its outdated business model.

Mr Ramaphosa said that breaking Eskom into three separate entities would enable the company to isolate its costs more effectively and give their responsibility to each appropriate body.

“This will also enable Eskom to raise funding for its various operations much more easily from funders and the market,” said Mr Ramaphosa, who is the leader of the ruling African national Congress party.

South Africa’s president did not give a timeline for when the entity would be split into three or say whether his government would consider privatising parts of it. But he did say more details would be revealed by the minister of finance in his annual budget address this month.

However, unions that represent the power utility’s workers believe the move is the government’s first step towards privatisation, which would lead to large-scale job losses at Eskom.

Workforce

The Congress of South African Trade Unions said in a statement that it wanted a commitment from Mr Ramaphosa that the restructuring would not result in job losses and that workers would not be “made to carry the can” for mismanagement at Eskom.

Eskom’s 2017 annual report put the company’s workforce at nearly 48,000 people. A 2016 World Bank study of utilities in 36 African countries said that Eskom was overstaffed by 27,500.

Mmusi Maimane, the leader of the main opposition Democratic Alliance, said Mr Ramaphosa had “taken a step in the right direction by beginning the break-up of Eskom”, but had not gone far enough.

Eskom currently has 27 operational power plants - the majority are coal fuelled - that generate more than 95 per cent of South Africa’s electricity. The utility also supplies more than 40 percent of Africa’s electricity needs, making it one of the 10 largest power utilities in the world.