Strike against job losses compounds blackout woes

South Africa’s biggest labour group staged a nationwide protest against job losses Wednesday, the latest setback for an economy reeling from four consecutive days of rolling power cuts.

The double blow comes at a terrible time for President Cyril Ramaphosa, who is gearing up to contest elections in May, is seeking to lure $100 billion in new investment and is trying to retain the nation’s sole investment-grade credit rating. The stayaway was called by the 1.6 million-member Congress of South African Trade Unions, which backs the ruling African National Congress.

Read: SA’s biggest labour group embarks on nationwide strike 

Workers at embattled power utility Eskom which produces more than 90% of the nation’s power and has been unable to meet demand after several of its generating units tripped, could be among those who join the labour action, along with civil servants, miners and construction workers.

The unions, which complain that the government isn’t doing enough to tackle a 27% unemployment rate, are planning a second strike in Cape Town on February 19, a day before finance minister Tito Mboweni presents the national budget.

National strike

“The national shutdown is under way,” Cosatu spokesman Sizwe Pamla said by phone. “Workers from all sectors of the economy in the private sector and public service are on board.”

Ramaphosa, who succeeded Zuma in February last year, announced last week that Eskom will be split into three businesses under a state holding company and it will be given financial assistance, with details to be announced in the budget. The unions oppose a break-up fearing it will lead to job losses and privatization.

Read: Splitting Eskom will protect its most strategic asset

While South Africa has suffered electricity shortages for more than a decade, the utility is at a crisis point and is seen as the biggest risk to the economy.

“Eskom presents a huge challenge for the ANC and Ramaphosa,” said Susan Booysen, director of research at the Johannesburg-based Mapungubwe Institute For Strategic Reflection. “There is no escaping that there will be job cuts, but I’m not even sure that the labour force is Eskom’s biggest issue.”

The ANC has won every election since the end of apartheid in 1994 and is seeking to keep its majority after support fell to a record low 54 percent in a municipal vote in 2016.

‘Technically insolvent’

The company expects to report a loss of about R20 billion ($1.45 billion) for the year through March, has wracked up R420 billion of debt and isn’t generating enough cash to service that debt and cover its operating expenses. In a report presented to lawmakers on Wednesday, the Department of Public Enterprises warned that Eskom is “technically insolvent and will cease to exist at current trajectory by April 2019.”

Eskom said it will cut 3 000 megawatts of power from the South African grid on Wednesday due to a shortage of generating capacity. The blackouts, which the utility implemented to prevent the collapse of the national grid and have shuttered businesses and caused traffic snarl-ups, are the consequence of construction problems at two new plants and years of deferred maintenance.

Read: Eskom needs bailout by April to survive

Water and diesel emergency reserves are “still very low” and the strike may further impact on operations, the utility said in a statement late Tuesday.

While extended power cuts will stifle industry and curb economic growth, market reaction has been muted. Foreigners have bought South African bonds and stocks each day this week and credit default swaps have edged lower since the cuts started. The rand weakened 0.2% against the dollar by 11:35 am on Wednesday in Johannesburg.

Eskom workers

The National Union of Mineworkers, a Cosatu affiliate that represents mining, energy and construction industry workers, expects more than 100 000 people to down tools, including Eskom workers who by law aren’t allowed to strike because they provide an essential service.

“I can tell you that the Eskom workers are very angry, so we are expecting thousands of them to take part in the strike,” NUM spokesman Luphert Chilwane said by phone.