Eskom hikes pay offer to ward off strike

cut power to Africa’s largest economy.
Hundreds of thousands of union workers have walked off the job in the past weeks, or are threatening to do so, seeking raises double or triple the current 5 percent inflation rate in the mid-year bargaining session known locally as “strike season”.

The strikes typically last up to a few weeks, slowing down production but causing minimal damage to the overall economy. Prolonged work stoppages that stretch into late August or power cuts at Eskom could put the brakes on growth for an economy inching out of the global slowdown.

The National Union of Mineworkers (NUM), which represents about 40 percent of the workers at Eskom, said the utility had increased its pay offer to 7 percent from 5,5 percent. The union is demanding 16 percent.
“Next week there will be no talks. We will meet the week after to take the discussion forward,” NUM spokesman Lesiba Seshoka said.
Eskom confirmed the offer. “It’s true that the offer has now been revised from 5,5 to 7 percent. The talks are on-going,” a company media official said.

Eskom has faced political pressure to give in to workers from the ruling African National Congress, which is in an alliance with organised labour and wants to appease the ally that has supplied it with millions of votes.
But if Eskom gives into NUM demands, it would mean wage and benefit increases of more than 35 percent over two years for its workers. Electricity workers already make an average of R25 773 rand (US$3 790) a month in wages and benefits, more than double the average non-farm salary, according to government data.

Eskom plans steep increases in electricity prices to pay for the new power stations needed by the country’s energy-intensive mining sector, adding to inflationary pressure and taking more money out of middle class paychecks.

Its 2008 power crunch forced mines and smelters to shut for days and deterred new mining and manufacturing investment.
Economists have said well-above-inflation wage settlements hurt the country’s competitiveness and long-term outlook by driving up the costs for a labour force already more expensive than those in other emerging markets and far less efficient.

“The impact of the strikes is to reduce consumption, reduce production and affect economic growth detrimentally.
They are inflationary and in the longer term they reduce employment,” said Rob Jeffery, a senior economist at Econometrix. – Reuters.