Eskom chairman Jabu MabuzaPicture: FREDDY MAVUNDA
Eskom chairman Jabu MabuzaPicture: FREDDY MAVUNDA

Eskom has frozen all new appointments as well as pay increases for senior management as it battles to reduce its crippling operating costs and secure a sustainable future.

The power utility is due to report its financial results for the 2017-18 year in July.

It is expected to report a sharp decline in profitability to either a break-even or even a loss-making position.

In 2017, it made a net profit of R888m on revenue of R177bn, with the wage bill carving out R37bn of this sum — an indication that pruning of employee costs was necessary.

Cost cutting is something that the new management team under acting CEO Phakamani Hadebe and the new board are grappling with as they attempt to turn around the utility, which has been gripped by allegations of state capture and wasteful expenditure.

Other state-owned enterprises such as Transnet and Denel have been caught up in similar allegations of state capture, while South African Airways and South African Express face a similar crisis of profitability, placing onerous demands on a financially constrained fiscus.

The freeze on salary increases and bonuses for top management of Eskom was communicated to staff in an internal memo last week and mentioned by Eskom chairman Jabu Mabuza during a media briefing on Tuesday ahead of the budget vote speech of Public Enterprises Minister Pravin Gordhan.

Eskom spokesman Khulu Phasiwe said there was still the possibility of small increases for lower-level staff as a result of the wage negotiations that kicked off last week.

However, Mabuza said Eskom would stress in its negotiations with employees that they needed to understand that the entity was experiencing difficulties.

Mabuza emphasised that nothing had been said so far about retrenchments, though he conceded that Eskom was too top heavy.

Even though pay scales and conditions of service of those in the upper ranks needed to be looked at, this did not mean that those at the lower ranks should lose their jobs as a result.

Review structure

Mabuza conceded that it was necessary for Eskom to revisit its entire structure and the capabilities of staff to make sure that there were the right people at the right places doing the right things. Making a comparison with other utilities around the world on a like-by-like basis and considering the different functions Eskom undertakes, Eskom’s staff complement should be at least 30% less, Mabuza said.

“We are about a third out of sync,” he said.

He noted that the utilities that Eskom compared itself with did not have a developmental mandate as it did.

ensorl@businesslive.co.za

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