Business

Eskom to spend up to R400m on severance packages

2020-02-13 15:13

Eskom has reportedly offered some managers voluntary severance packages, capping costs at R400 million, a communique sent to staff by the struggling power utility showed.

Eskom does not generate enough cash to cover its mammoth debt servicing costs and expects to make a loss of about R20 billion this financial year.

The severance packages are open to managerial employees in non-core positions as well as managers from 60 to 62 years old, according to the communique, which was dated February 6.

Eskom spokesperson Sikonathi Mantshantsha declined to comment.

Analysts have long said that Eskom should cut its bloated workforce of more than 46 000 staff.

Staff levels remain close to what they were when a World Bank study in 2016 found that Eskom was potentially 66% overstaffed.

The workforce has grown more than 23% in the past decade.

Under pressure from trade unions, President Cyril Ramaphosa said last year that voluntary severance packages would be the preferred method to cut costs at Eskom, rather than layoffs.

Eskom said in the communique that staff could apply for the severance packages from the third week of February, with employee exits planned for the end of April.

While Ramaphosa kept his promise to address governance issues at state-owned companies, most notably with the appointment of Andre de Ruyter as permanent chief executive officer of Eskom, the financial crises at the firm continues.

Plans to split Eskom into three separate units and reorganise its R454 billion debt pile are yet to be finalised.

The power utility is seen as the biggest threat to South Africa’s economy because it doesn’t generate enough cash to service its debt and is surviving on government bailouts.

The growing debt burden poses a threat to state finances, with guarantees for the utility that stood at R350 billion a year ago.

Eskom also offered voluntary severance packages in 2015.

– Reuters and Bloomberg

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February 23 2020