Eskom’s New CEO Takes First Step to Trim Outsized Wage Bill

(Bloomberg) --

Eskom Holdings SOC Ltd.’s new boss has taken a first step to reduce the indebted South African power utility’s bloated wage bill while avoiding a potential clash with labor unions.

Chief Executive Officer Andre de Ruyter, who took office at the start of the year, intends trimming Eskom management by offering voluntary severance packages to personnel aged 60 to 62. The utility set aside 400 million rand ($27 million) for the plan, an allocation it expects to recoup through savings within a year.

Eskom’s New CEO Takes First Step to Trim Outsized Wage Bill

Asking staff to leave of their own accord is a relatively easy measure that can be utilized to start trimming staff numbers, according to Andrew Levy, managing partner at Andrew Levy Employment, which advises companies on labor relations.

“It is really top heavy,” he said. “The voluntary package is a portent of things to come.”

Eskom has amassed 454 billion rand ($30.5 billion) in debt, and isn’t generating enough income to cover its operating costs. While its headcount fell about 4% to 46,665 in its last financial year, it still has about a third more staff than it says it needs and wider job cuts have been resisted by labor unions.

De Ruyter embarked on extensive cost cutting during his previous tenure as CEO of packaging company Nampak Ltd,. disposing of loss-making units and reducing staff numbers to shore up the company’s balance sheet. While he’s ruled out firing Eskom workers, the utility does need to further reduce a workforce that’s expanded more than 23% in the past decade even as electricity sales volumes declined.

“Eskom cannot survive without massive staff cutbacks,” Levy said.

So-called lifestyle audits already under way at the utility -- to weed out corruption and curb reckless spending -- will be extended to lower-level staff, News24 reported on Sunday, citing De Ruyter. Audits of senior managers and their families that began two year ago resulted in a number of disciplinary actions, with some cases referred to the police’s Special Investigating Unit, it said.

Applications for the voluntary packages will start in the third week of February, with exits planned by the end of April, and no critical skills will be lost in the process, according to Eskom. The voluntary severance won’t be offered to staff who don’t hold management posts.

The National Union of Mineworkers and the National Union of Metalworkers of South Africa, the two largest unions at Eskom, didn’t immediately respond to requests for comment.

©2020 Bloomberg L.P.

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