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Overstaffing and billions in salaries? Fact-checking viral claims about South Africa’s power utility Eskom

Frustration with Eskom runs deep in South Africa. But is it true that the ailing power utility is overstaffed by 66%, costing billions of rands in excess salaries?

  • The claim of extreme overstaffing is based on a 2016 World Bank working paper, which worked out a benchmark for customers-per-employee based on Latin American power utilities.

  • Numbers in sub-Saharan Africa were then compared against this, but the process had shortcomings. Researchers admitted their paper was a simplified analysis and local analysts have subsequently said the study made inaccurate assumptions.

  • Eskom has admitted to being overstaffed but debt owed to the company and ageing infrastructure pose greater problems.

South Africa’s state-owned power utility Eskom is never far from public attention due to debilitating countrywide electricity blackouts that began as far back as 2008.

Eskom says the power cuts, euphemistically known as load-shedding, are legal and help stave off the risk of a total national blackout.

Because of load-shedding’s impact on the economy and daily life, claims about Eskom’s operations are frequently debated.

One such claim is that Eskom is overstaffed. A much-shared tweet recently rode on this view. 

“The World Bank reports that @Eskom_SA is 66% overstaffed. Salaries for 27,543 surplus staff amount to R1,3772 bn/annum,” the tweet, circulating on social media since September 2022, read. 

Africa Check has previously looked into claims about Eskom employees. We found that while the utility has become less efficient at generating electricity, staff costs have gone up. 

But is Eskom overstaffed by 66%? And do surplus staff cost it hundreds of millions of rands?

Claim

Eskom is 66% overstaffed.

Verdict

Incorrect

This claim is not new. It comes from a 2016 policy research working paper published by the World Bank that looked at the financial viability of electricity sectors in 39 sub-Saharan African countries. Staffing data was available for 36 of these countries.

It found that in 2014 South Africa’s power utility had the largest workforce of these 36 countries, with 41,787 employees. 

Eskom consists of three businesses licensed by the National Energy Regulator of South Africa (Nersa) – generation, transmission and distribution.

Eskom_Insert

Eskom consists of 3 divisions. Source: https://static.pmg.org.za/170912Eskom.pdf

The bank estimated that Eskom only needed 14,244 employees: 9,596 for its transmission and distribution divisions and 4,648 for generation. 

The World Bank’s overstaffing benchmark was derived using the following methodology

1) The bank identified 36 sub-Saharan African utilities and grouped them into three clusters:


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2) The bank then identified utilities in Latin America with similar distribution and transmission lines and similar customer numbers to work out an average customers per employee value.

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3) The total numbers of employees reported by African utilities were then compared against this value. 

The bank recorded 5,477,602 Eskom customers and had the utility’s transmission and distribution lines at 79,811 kilometres. 

It subsequently concluded that Eskom was 66% overstaffed, the highest of the utilities, employing 27,543 more people than it needed. 

Study not a substitute for in-depth country analysis

The 2016 World Bank paper was a working paper, meaning it was not published in a formal peer-reviewed journal and was at time of publication still pending independent review. 

It had further limitations.

The benchmarking analysis was simplified to cover dozens of countries for cross-country comparison, the researchers said

“Results for any individual country should not be used as a substitute for an in-depth country-level analysis.”

And as Eskom’s Ulrich Minnaar, a manager at the utility’s research, testing and development section wrote in this 2020 paper, the World Bank study didn’t factor in up to 78% of Eskom’s distribution network, and only accounted for a sixth of its customer density.

Minnaar concluded that the bank therefore made incorrect assumptions around the number of employees required per kilometre of Eskom’s network. But the paper continues to be widely cited.

David Walwyn, a professor in engineering and technology management at the University of Pretoria, told Africa Check the methodology employed by the World Bank was unreliable. 

He said: “I think customers per employee is an unreliable metric for benchmarking studies of a power utility, given that such utilities are so different in terms of the technologies they use … the customers they serve and the economic context within which they operate.”

Eskom employs almost 5,000 more people than it needs

Walwyn said that in 2021, Eskom chief executive André de Ruyter admitted the utility had more employees than it needed, but not by 66%.  

"In other words, by the CEO's own admission, there is an overstaffing level," Walwyn said.

After an analysis, De Ruyter concluded that Eskom needed about 38,000 employees to perform at optimal level.

According to the most recent report, which covered the financial year ended 31 March 2021, Eskom had 42,749 employees. Using De Ruyter’s numbers, this translates to an overstaffing of 4,749 employees or by about 12.5%.

Claim

Salaries for the 27,543 surplus Eskom employees amounts to R1.37 billion per year.

Verdict

Incorrect

A second claim in the viral tweet was that the extra 27,543 Eskom employees, as calculated by the World Bank, cost R1.37 billion in salaries every year.

We have already established above that the overstaffing number of 27,543 is contested and is at least five times Eskom’s own estimates. 

Over the years, there have been several claims about the “average salary” at Eskom. In 2017, it was reportedly R780,000. But the National Union of Mineworkers, which represents a majority of Eskom employees, rubbished these numbers, saying that its ”members do not earn that kind of money”.

In 2014, the year that the World Bank calculated Eskom had 27,543 surplus employees, "direct costs of employment" at the utility were R24.44 billion. It had 46,919 employees at the time. 

This works out to an average salary of R520,000. Of course, not all Eskom employees would have earned as much as that a year. But Eskom’s financial statements do not provide a breakdown of pay levels. And as energy analyst Chris Yelland previously told Africa Check, the average is still worth considering. 

If Eskom had 27,543 surplus employees in 2014, it would have cost the utility up to R14.3 billion, significantly more than the figure claimed in the tweet. 

We looked at Eskom’s most recent financial statements for an idea of what the utility's surplus employees could cost today. 

In 2021, "direct costs of employment" at Eskom were R32 billion. Divided equally between 42,749 employees, this works out to an average annual salary of R748,000. 

Eskom, by its own estimation, employs 4,749 more people than it needs. Multiplied by R748,000, the salaries for the surplus staff could be as much as R3.5 billion a year.  

Nonpayment, debt the real issues at Eskom 

Rather than overstaffing, De Ruyter has highlighted nonpayment by the country’s municipalities as one of the biggest challenges the utility faces. 

And, according to Walwyn, even if the surplus staff were to cost the organisation extra in unproductive costs, that's nothing compared to the total amount of debt of the organisation. Debt totalled R398 billion in 2021.   

Having more staff may not be the biggest culprit for Eskom’s financial and operational challenges, he told Africa Check. 

Eskom’s energy availability factor (EAF),  the percentage of electricity available to be generated, was low, Walwyn said. At 62% in March 2022, the EAF was below the targeted performance level of 74%

This was mainly due to difficulty bringing new capacity on stream and ageing infrastructure, Walwyn added.

Conclusion: Eskom numbers in much-shared tweet don’t add up

With many South Africans frustrated by daily power cuts, a harsh spotlight has been trained on Eskom, the country’s power utility.

A  tweet repeated claims that have gained traction in recent years: that Eskom has 66% more employees than it needs and that those extra staff cost the company hundreds of millions of rands in salaries.

Those numbers come from a much-cited 2016 World Bank working paper that has since been criticised. And as an analyst told Africa Check, Eskom’s biggest problem is its unreliable infrastructure, coupled with debt owed to it.

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