South African unions accept Eskom wage offer as power cuts bite

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JOHANNESBURG, July 5 (Reuters) - South Africa's state owned utility Eskom and workers' unions signed a wage deal on Tuesday, paving way for a possible resolution to its worst power cuts in two years.

Struggling Eskom and its three recognised labour unions signed the agreement for a 7% salary increase a week after Eskom started implementing prolonged power cuts, blaming them on striking workers hampering efforts to bring malfunctioning power units back online.

Eskom said power supplies would still take time to recover and urged its staff to return to work to begin the process.

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"As a result of the strike, maintenance work has had to be postponed, and this backlog will take time to clear," it said.

Eskom relies on an ageing coal fleet that is highly prone to faults. South Africa has faced intermittent power cuts for more than a decade that have hindered economic growth.

The so-called "Stage 6" outages imposed by Eskom since last week have meant at least six hours a day without power for most South Africans. The last time they were as bad was in December 2019.

Already burdened with unsustainable debt levels and tariffs that are not yet cost-reflective, Eskom said the wage increase "will be a struggle for Eskom to afford".

Razia Khan, chief Africa and Middle East economist at Standard Chartered, said although the wage deal was positive, "big picture, questions of affordability persist. This doesn’t really make Eskom’s more significant challenges go away".

Small businesses have borne the brunt of the latest outages, while still reeling from the impact of the COVID-19 pandemic and inflation, which is at a five-year peak. read more

"These disputes always get resolved in the end. The question is how much damage is done in the course of reaching this end,” energy analyst Chris Yelland told broadcaster eNCA.

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Reporting by Bhargav Acharya, Nellie Peyton, Anait Miridzhanian, Nelson Banya and Alexander Winning; Editing by James Macharia Chege and Alison Williams

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