Eskom to count cost of higher wage offer

Johannesburg - While the new Eskom wage offer does not necessarily mean that consumers will have to pay higher prices for their electricity, it does put more pressure on the power utility to extract further efficiencies from its business.
    
Eskom averted threatened strike action by clinching an 11th hour wage deal with three trade unions - the National Union of Mineworkers, the National Union of Metalworkers of South Africa and Solidarity - on Sunday.
   
The trade unions welcomed Eskom's revised offer of a nine percent wage increase and a R1 500 housing allowance, saying they would urge their members to accept the offer.
  
Eskom previously offered an 8.5% wage increase and a R1 000 housing allowance while the unions demanded a nine percent wage increase and a R2 500 housing allowance.
   
But at almost twice South Africa's May inflation rate of 4.6%, the wage increase raises the bar for public sector wage increases.
   
The offer, which unions have until Friday to rubber stamp, could put the government under pressure as public sector pay negotiations are still to be concluded.
   
Moreover, the pay increase will raise costs at Eskom, which has to bankroll a R460bn expansion programme.
   
Eskom said last week that the wage increases demanded by the trade unions was way above the 5.6% recommended by the National Energy Regulator of South Africa (Nersa).
  
Eskom CEO Brian Dames said Eskom's offer of 8.5% was already R450m above the wage increase allowed by the regulator while the unions' demand would be R1bn above the regulator's allowance.
   
He said Eskom could not afford to up the offer - even by 0.5%.
  
The utility, whose group wage bill was R15.7bn last year, is yet to confirm the impact the new offer will have on its wage bill.
   
Dames said any amounts above the regulator's allowance would have to be made up through improved efficiencies in the organisation.
   
He also said he had no intention of going back to the regulator to ask for an adjustment.
   
Nersa earlier this year approved price increases of an average of 25% a year over the next three years.
   
It said the power utility could increase its tariffs by 24.8% in April 2010 and could then increase tariffs by a further 25.8% from April 2011 and another 25.9% from April 2012.
   
This indicates that the wage increase will not flow through to the consumer - for now. But the knock-on affects of higher wages, particularly if the increases are not recovered through internal savings and efficiencies, will no doubt have some impact when it comes the time for the utility to apply for its next round of increases.

- I-Net Bridge