/ 28 May 2021

No retrenchments as Eskom forges ahead with unbundling

Nampak Ltd. Chief Executive Officer Andre De Ruyter Interview
Former Eskom chief executive Andre de Ruyter. (Waldo Swiegers/Bloomberg)

There will be no forced retrenchments as a result of Eskom’s unbundling, the state power utility’s chief executive André de Ruyter revealed on Wednesday.

During a briefing of parliament’s select committee on public enterprises and communications, De Ruyter said Eskom had taken this stance to protect jobs during the transition. 

Eskom’s unbundling into three separate entities — generation, transmission and distribution — will be concluded in December 2022, according to the department of public enterprises. The legal separation of the transmission company will be completed by the end of this year.

“We intend to avoid any section 189 retrenchments under the Labour Relations Act. I think that that is an indication of the seriousness with which we approach the interests of those colleagues of ours who belong to our three recognised unions,” De Ruyter said.

Eskom is currently locked in wage negotiations with unions. Last week, it tabled a 1.5% wage increase, which was rejected by unions. The National Union of Mineworkers and National Union of Metalworkers of South Africa are seeking a 15% increase.

Commenting on the wage talks, De Ruyter said: “As always, when these negotiations take place the tensions may become somewhat elevated. But at this time, we enjoy cordial and good relations with our unions. And we engage with them in an open and constructive manner.”

Eskom is confident it will be able to maintain the peace with organised labour going forward, he added.

Labour will be one of the key stakeholders that Eskom will have to manage as it embarks on its complicated unbundling process. It will also have to keep lenders happy. This is because they will need to be assured that Eskom will not default on its loans amid the unbundling process. 

Eskom’s presentation to parliament on Wednesday laid bare the complex number of bureaucratic hurdles that need to be conquered in the unbundling race. Policy and

legislation will need to be reformed, while licensing and tariffs will also have to be unbundled.

According to Eskom chief financial officer Calib Cassim, the legal unbundling will cost the power utility about R500-million. Most of this (42%) will go to changes to the entity’s information technology infrastructure. The rest will be split between lender engagement (26%) and commercial and land contract changes (22%).

De Ruyter assured members of parliament that Eskom’s management is doing everything it can to expedite the unbundling process. “We are forging ahead with as much speed as we can muster,” he said.

Earlier this week, Public Enterprises Minister Pravin Gordhan said in his budget vote speech that Eskom had achieved substantial progress towards restructuring. A total of 9 400 workers have been relinked with power stations and 6 773 have moved from corporate functions to divisions in preparation for their legal separation, Gordhan said.

De Ruyter said that though the deadline set for Eskom’s unbundling is ambitious, the power utility is currently on track to meet it. 

“The typical timelines for a restructuring of this magnitude in the private sector is a number of years. And without indulging in any self praise, I would venture to suggest that Eskom is so far moving very expeditiously in concluding the restructuring process.”