The high price of load shedding

Recessionary conditions are threatening the economy amid continued warnings of South Africa plunging into darkness, while experts say the power utility’s road back to profitability will be long and hard, but not entirely impossible.

It would, however, require possible job losses at the utility, whose finances are already stretched thin.

Despite the fact that workers are expected to return today, the effects of last week’s labour action would be felt for days to come.

Economist Chris Hart said although Eskom had assured the public that load shedding was a “thing of the past” two years ago, the utility now appears to be in a precarious position.

However, he said Eskom still had the opportunity to improve and bounce back to profitability.

He pointed out that one of the biggest concerns was that their wage bill was inefficient, and that the continued increase in the amount of well-paid workers would worsen its ongoing cash flow problems, which would in turn lead to even less profitability and less cash flow.

Although the simplest solution to most would be staff reduction, fellow economist Mike Schussler said it was more complicated than that.

He said while staff reduction definitely needed to be implemented, only a small percentage of the utility’s revenue went to its workers, which made it a minor issue compared to the other burning issues.

These included interest rates and toll controls. However, he said a reduction of staff was inevitable, and would be the most emotional and difficult issue to deal with.

Eskom spokesperson Khulu Phasiwe said the power utility was unsure on whether all its staff would return to work today, which meant its stability status was still uncertain.

He also added that once stability had been reached, it was the intention of the utility to carry out a “mop-up” operation to fix everything broken within its enterprise to prevent revenues from being lost and companies reliant on power from closing down.

The National Union of Metalworkers of South Africa’s (Numsa’s) general secretary, Irvin Jim, said the union “views the agreed process of engagement as necessary in resolving the dispute between us and Eskom management, and laying the grounds for the negotiations to continue”.

“We are ready to engage meaningfully with Eskom on our demands, as has been our attitude from the beginning of the negotiations.”

According to the department of public enterprises’ Richard Mantu, the resolutions from the meeting on Friday were to “resume negotiations with immediate effect, as it was agreed the 0% offer from Eskom was off the table, and to normalise operations immediately and restore production to ensure the security of electricity supply, to engage on other key issues that are impacting on the future sustainability of Eskom such as the cost of coal and impact of policy – including the independent power producers programme – and to begin a process to build a trustworthy relationship following the wage negotiations.”

– jenniffero@citizen.co.za