Ramaphosa Sets Up Battle With Unions on Eskom Ahead of Election

(Bloomberg) -- South African President Cyril Ramaphosa upped the ante in a showdown with his labor allies over plans to reorganize the embattled state power utility less than three months before national elections.

Union backing may be crucial for Ramaphosa to secure a decisive majority in the May 8 vote and cement his control over the deeply divided ruling party. But that support is at risk, with the unions vowing to oppose the breakup of Eskom Holdings SOC Ltd. into three units because it could lead to privatization and job losses.

The government took the wrangle a step further on Wednesday, saying in the national budget that it intends to sell a stake in the company’s transmission business and buy more renewable energy from independent producers -- moves likely to anger the Congress of South African Trade Unions, the country’s biggest labor group.

“As to the unions, they must confront the reality that things cannot be as they have always been,’’ Finance Minister Tito Mboweni told reporters in Cape Town before delivering his budget speech. “The conversation cannot go on forever.’’

Mboweni insisted the decisions don’t necessarily mean privatization, and said it was an option for the Public Investment Corp., which invests civil servants’ pensions, to swap Eskom debt for equity.

Eskom Bailout

The government will also give Eskom a 69 billion-rand ($4.9-billion) bailout over three years to help rescue the utility, largely funded by cuts to the state wage bill. It hinted that the utility may have to cut jobs.

Ramaphosa, 66, won’t take on the unions lightly -- he founded the National Union of Mineworkers in 1982 and support from Cosatu helped him win control of the ruling party in December 2017. That laid the ground for him to replace Zuma as president a year ago.

But he also desperately needs to fix Eskom, which is drowning in debt, can’t pay its bills or produce enough electricity to meet demand and is seen as the biggest risk to the country’s economy.

The utility, which supplies 95 percent of South Africa’s power, has 48,628 staff, about a third more than it says it needs.

The unions may yet block the government’s plans to restructure Eskom. They showed their strength last year when workers derailed the utilities’ plans to freeze salaries by shutting down power plants and eventually secured inflation-beating increases for three years.

Opinion polls conducted late last year showed Ramaphosa’s African National Congress winning about 60 percent of the national vote. That would be an improvement on the municipal election in 2016. It’s dominated domestic politics since the end of apartheid in 1994, with the backing of Cosatu and the South African Communist Party.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editors responsible for this story: Karl Maier at kmaier2@bloomberg.net, Gordon Bell, Rene Vollgraaff

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