The Eskom Megawatt Park headquarters in Johannesburg. Picture:BLOOMBERG/WALDO SWIEGERS
The Eskom Megawatt Park headquarters in Johannesburg. Picture:BLOOMBERG/WALDO SWIEGERS

Cash-strapped power utility Eskom has put aside R400m for packages for noncore staff who want to voluntarily leave the company, so as to cut costs.

On Thursday, Eskom confirmed that it has started the voluntary separation package (VSP) process targeted at senior employees, but excluding nonmanagerial staff, which will cut overhead costs. It said the money spent on the process will be recouped through savings within a year.

“The purpose of the separation process is to rationalise management layers, which will lead to an efficiently run company,” the power utility said in a statement. Eskom will ensure that no critical skills will be lost as a result of the programme, and management will take every precaution to ensure that the VSP process caters to the best interests of Eskom.

Eskom faces a severe financial and operational crisis, with cash from operations falling short of monthly debt-servicing costs. Despite a R128bn government bailout over the next three years, the situation is so dire that the government is considering a proposal by union federation Cosatu to use worker pension funds to pay down part of the utility’s daunting R450bn debt.

The power utility is said to be overstaffed with as many as 27,500 employees.

A 2016 World Bank study of utilities in Africa, which looked at the staffing data for 36 countries, found that Eskom needs a workforce of 14,244.

In 2007, Eskom employed 32,674 people and sold 218,120GWh of power. The number of employees ballooned by nearly 50% to 48,628 in the 2018 financial year, while sales declined to 212,190GWh.

According to a letter to executives from group executive of human resources Elsie Pule, a window of voluntary separation packages (VSPs) will open for managerial level employees.

Staff aged form 60 to 62 will be eligible to apply irrespective of being in core, critical or noncore positions.

Pule said the process was voluntary and no employee should be coerced or requested to apply. She said approval of VSP applications would be at Eskom’s discretion and based on approved guiding principles that would be communicated.

Each division will be allocated a cap on funds based on the proportion of eligible employees.

The approved separation benefits will be based on two weeks remuneration per completed year of service and a gratuity payment of R75,000.

The window for applications will open in the third week of February, with employee exits planned for the end of April — except for those taking early retirement.

In 2015, Eskom shelved plans to reduce staff numbers and arrest spiralling costs after a voluntary separation process at the time attracted thousands of applications from people with skills it did not want to lose.

At the time, Business Day  reported that in the first month of the voluntary separation process Eskom received 4,000 applications.

Twenty employees left the power utility in March 2015, including senior and special-skills staff in the nuclear division, after their applications were signed off before other applications started flooding in.

Pule said that as part of the lessons learnt from the VSP rollout in 2015, Eskom is exploring a centralised application technology platform and decision-making process.

Update: February 13 2020 
This article has been updated with comment by Eskom.

quintalg@businesslive.co.za