June 18, 2018 / 11:21 AM / in 5 months

UPDATE 2-S.African union open to inflation-linked pay deal at Eskom - source

* Eskom began power cuts last week after wage protests

* Utility produces 90 pct of South Africa’s electricity

* Unions had wanted 15 pct pay hikes, Eskom offered no rise

* Inflation-linked wage settlement now more likely (Recasts to focus on inflation-linked deal)

By Ed Stoddard and Alexander Winning

JOHANNESBURG, June 18 (Reuters) - South Africa’s National Union of Mineworkers (NUM) is open to an inflation-linked pay rise for its members at struggling state power firm Eskom instead of its initial demand for a 15 percent increase, a source at the union told Reuters.

Africa’s most industrialised economy suffered power outages last week because of what Eskom had said was an “illegal protest action” by the NUM and two other unions.

The unions, who were incensed by Eskom’s initial refusal to offer pay rises for this year, had threatened a “total shutdown” of the power firm.

The last time there were controlled power outages in South Africa, in 2015, economic output suffered.

The NUM source, who did not wish to be named, told Reuters on Monday that the mineworkers’ union would consider a wage offer from Eskom of “inflation plus a certain percentage”.

South Africa’s consumer inflation was running at 4.5 percent in April, well below the level unions had initially targeted.

Cutting costs at troubled state entities such as Eskom is a top priority for President Cyril Ramaphosa, and the labour dispute at Eskom will test his administration’s commitment to reforms aimed at putting a sluggish economy on a sustained growth path.

Eskom produces more than 90 percent of South Africa’s power and was embroiled in corruption scandals under former president Jacob Zuma. It has said it could be forced to resume controlled power cuts - known locally as load-shedding - on Monday evening, when electricity demand is higher in the winter season.

A potential stumbling block to the conclusion of a wage deal between Eskom and unions this week was that the NUM is scheduled to hold its national congress from Wednesday to Friday, when new union leaders will be elected.

But the NUM, the National Union of Metalworkers of South Africa (NUMSA) and Solidarity all agreed to resume talks on Tuesday after Public Enterprises Minister Pravin Gordhan said that Eskom would make a pay hike offer.

Gordhan oversees Eskom in Ramaphosa’s cabinet and is guiding efforts to reform South Africa’s cash-strapped state-owned companies.

The three unions, the NUM, NUMSA and Solidarity, say they together represent more than half of Eskom’s 47,000 employees.

Deon Reyneke, deputy secretary general of the Solidarity trade union which represents mostly skilled workers, said Eskom had signalled to unions that it would be looking at a formula linked to consumer inflation for its next wage offer.

Phakamile Hlubi-Majola, a NUMSA spokeswoman, said the metalworkers’ union would not reveal its negotiating position until talks had started.

Eskom has now conceded that it will grant some increase in wages.

Asked about the NUM source’s comment on an inflation-linked increase, Eskom spokesman Khulu Phasiwe said the company’s management was still “crunching the numbers” ahead of the resumption of talks.

Phasiwe said Eskom had been able to return several generating units to the grid on Sunday as some workers had returned to work. He said the power firm, which narrowly avoided a liquidity crunch early this year, had sent a “positive signal” to employees by agreeing that a zero percent salary increase was now off the table. (Reporting by Ed Stoddard and Alexander Winning Editing by Catherine Evans and Adrian Croft)

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