THE South African State-owned power utility’s inflation-beating pay deal struck with protesting workers sets a dangerous precedent for on-going public-sector wage negotiations that may add to price pressures and weigh on state coffers, according to S&P Global Ratings.
Eskom Holdings this week signed a one-year deal with three labour groups for a 7% pay hike and an increased monthly housing allowance. While the agreement ended illegal and violent protests that deepened electricity outages in Africa’s most industrialized economy, it will add more than 1 billion rand ($59 million) to the cash-strapped utility’s wage bill for the next 12 months.
Eskom, which relies on government support to keep operating, said it will struggle to afford that.
“It’s sub-optimal from a number of perspectives,” Omega Collocott, S&P’s director of corporate ratings for South Africa, said in an interview.
“The increase is higher than Eskom had budgeted for, it is above the official inflation rate, which is obviously precedent setting
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