Update by Eskom on labour unrest at Medupi and Kusile Power Stations

Meeting report

Opening Statement
The Chairperson welcomed the delegation from Eskom. He noted that the state entity had been requested to brief the Committee on the labour unrest that was taking place at Medupi and Kusile power stations.

The Chairperson said that the Committee was aware that the Chief Executive Officer and Chairman of Eskom were unable to attend the meeting. They had communicated this to him and they had agreed that the board meeting was important and had to be attended. The CEO and Chairperson had assured the Committee that they would send Eskom officials that were highly competent.

Eskom Briefing on the Labour Unrest
Mr Kannan Lakmeeharan, Managing Director: Systems Operations and Planning, Eskom, stated that the purpose of the meeting was to give Members a comprehensive background on the recent labour unrest in Medupi and Kusile power station projects, to share feedback on the sequence of events regarding the strikes, to share mitigation plans that were put in place, and to highlight the current situation.

The presentation showed the construction timelines for the two power stations. Medupi‘s construction started in May 2007 and Kusile’s started in April 2008. The first concrete poured in at Medupi was in July 2008 while the first concrete poured in at Kusile was March 2009. Medupi had its first lift shaft completed in August 2009 and Kusile had its first lift shaft completed in April 2010. Medupi was scheduled to receive its final unit load in 2015 and Kusile was scheduled to receive its last unit load in 2018.

Mr Kobus Steyn, Senior General Manager: New Build Project (Eskom), informed the Committee about the Project Labour Agreement (PLA) Eskom had with the workers and contractors. Eskom did not employ the workers doing construction work on the sites; the contractors employed them. Eskom’s New Build projects were governed by the PLA, which was signed by the contractors, employers’ organisations and the six recognised industry trade unions. The PLA made provision for the use of expatriate labour and the approval process for such use. No expatriate labour may be mobilised to the project without prior approval by Eskom. A key element for this was the consultation by contractors with organised labour on the use of expatriate labour. Furthermore, contractors were required to show that recruitment drives had been held within South Africa and that a shortage of skilled resources was proven. In addition, contractors had to implement skills transfer programmes between foreign craft and local labour. The lack of suitably skilled welders for both the boiler and turbine contracts at both Medupi and Kusile was identified as challenge concerning the supply of local labour.

Mr Steyn said that the incidences of labour unrest at Kusile and Medupi power stations were very different; therefore he would be taking the Committee through them separately.

Kusile Power Station
Site activities were disrupted on several occasions during the period starting at 18-19 April 2011 and 4-6 May 2011. On 6 May, all construction activities were brought to a halt due to protest action that erupted into acts of destruction of offices, motor vehicles and plant.

Two events of significance preceded work disruption. The first event was a demand by Roshcon (the contractor) employees that the contractors’ management accept a memorandum detailing their demands, with the Eskom Project General Manager as a witness. The second event related to the application of the “no work no pay” principle detailed in the Kusile PLA by the Kusile Civil Works Joint Venture (KCWJV) contractors management. This was considered an illegal strike.

Roshcon employees’ demands included:
•Training for all unskilled labourers
•45% of female workers had to be trained with the relevant skills
•Re-employment for all local employees at current contractors at the Kusile Project
•That first preference be given to those in Kusile Learnership
•That a committee had to be established to work directly with Eskom Information Centres (recruitment centres)

On 18 April 2011, a verbal, unofficial notification of an impending protest was received by Roshcon employees’ shop steward that indicated that employees wanted to hand over a memorandum. On 19 April 2011, Roshcon employees “clocked in” and subsequently returned to the picketing area outside the main entrance to the site. On 2 May 2011, the Kusile Executive Team met with all Kusile principle contractors on site to share Kusile safety plans as well as to understand what the contractors plans were for the return of employees on 3 May 2011. On 4 May 2011, Roshcon employees handed a memorandum to their management in the presence of Eskom’s management as per the workers demands. KCWJV workers went on strike in sympathy with their Roshcon counterparts. On 6 May 2011, employees reported for work but did not commence with their normal duties. After receiving the news that they would not get paid based on the PLA “no work no pay” principle, employees went on a rampage. Vehicles were stoned, 11 contractor vehicles and six offices were set alight, offices and stores were looted, the west wing of the KCWJV office was set alight, and one Roshcon office was also set alight.

The site was now open and operational, and all contractors were back on site except for Roshcon and Kusile Civil Works. Affected contractors were continuing with plans and actions to bring their employees back to site. Criminal charges of arson, possession of stolen goods and malicious damage to property were laid with the police and arrests were made within days of the incident. The risk was that contractors would not reach an amicable agreement with the employees as soon as possible, which would result in delays in delivery from the contractors. Contractors had to go through normal disciplinary actions as per the PLA. Additional security measures had been put in place.

Medupi Power Station
Site activities ceased and contractors’ workers were evacuated from the site following the violent protest on Tuesday, 10 May 2011. This even took place subsequent to a grievance regarding expatriates employed on site. There was a series of engagements regarding the dissatisfaction by some of the contractor employees around the Thai welders, riggers and pipe fitters. The claim was that these trades were not scarce in South Africa and such opportunities were supposed to have been given to fellow South Africans. This was considered an illegal strike.

On 10 May 2011, approximately 500 workers belonging to Murray and Roberts Projects (MRP), a sub-contractor to Hitachi, embarked on a violent protest on site. There was stone throwing, intimidation and unprecedented violence. The number of protesters grew rapidly and the site was unsafe. Law enforcement agencies were called in to deal with the situation. An office, a bus and two cars were burnt down, and three cars were overturned. Millions of Rands was lost due to lack of production. To date only 11 minor injuries were recorded, which were mainly due to stone throwing.

Site restriction was lifted on 16 May 2011 and contractors were gradually mobilised. By 27 May 2011 the site was progressively operational, with over 8000 workers reporting for duty. Police presence would be maintained until the site was fully normalised and safe. Hitachi MRP employees had signed an agreement to return to work and had acknowledged disciplinary action as well as further disciplinary requirements on site. Organised labour had been consulted on the remobilisation process and conduct of their employees.

Criminal charges of arson, public violence and attempted murder were laid with the police and four suspects were apprehended. One suspect handed himself over to the police on 27 May 2011. There had been overwhelming support from provincial and Local Government and other key stakeholders throughout that period. The contractors had been given a chance to resolve issues with their employees. There had been continuous engagements with key stakeholders including surrounding communities. Eskom and the contractors would use the valuable lessons learnt from the strike to prevent or better deal with future incidents. Eskom was working towards recovering lost time so that it could meet its commitment of project delivery by 2012. The delivery of the two projects was not under threat as a result of the strike. 

Discussion
The Chairperson asked if Eskom had any monitoring and evaluation mechanisms in place to pick up, timeously, any “eruptions” of labour unrest so that they were not surprised by such actions in the future.

Mr Steyn replied that Eskom had taken quite a few steps in the past to mitigate these kinds of actions. At another power station that Eskom had built, they utility had sent some of its people undercover to gather intelligence in terms of what was happening on the ground level so that it could be prepared for whatever happened.

Mr P van Dalen (DA) said that the ward that he was part of included a place called “Happy Valley”. A big bus company came to him a while ago and said that it needed 150 people from Happy Valley to train as bus drivers. He went to Happy Valley and got a list of names for the bus company, but after a week he noticed that they were all back at home. He asked them why they were not working as bus drivers and was told that they would be earning too much money and would not qualify for a government house. Also, in Cape Town, Many of the waiters and waitresses working in restaurants were from other countries. When they were asked why they were working at restaurants and not the local people, they said that local people were too lazy and did not want to earn that little money. Contractually, Eskom had to hire local labour, but there was a problem with local labourers that just did not want to work or were not skilled enough. He wondered how this affected Eskom. If local labourers did not want to work then Eskom had to get workers from somewhere else. He was also concerned that power stations were supposed to be a national key point with a high level of security, especially since Medupi and Kusile power stations were being built so the country would not run out of energy. These stations had to be built sooner rather than later. Finally, he asked if the power stations only became a national key point once they were finished and Eskom was fully in charge, or if they were considered national key points from the moment it was decided that they would be built.

Mr Babhalazi Bulunga, Divisional Executive: Human Resources, Eskom, replied that local labour wanted to work. The key dispute came from the “demobilisation” of approximately 600 workers. Their contracts were coming to an end and this was what sparked some of their actions.  In addition, he acknowledged that Eskom needed to increase the amount of security they had at the power stations to ensure that every worker was safe and that the violence was not repeated.

Mr Steyn added that Medupi and Kusile power stations were not declared as national key points yet. This would only happen once the first units of power were produced on a commercial basis. Currently, Medupi and Kusile were not being managed as national key points.

Mr L Greyling (ID) felt that the strikes seemed to have come out of the blue. He asked if there was a build up to the strikes and if the strikes at Medupi and Kusile power stations were linked. Their demands seemed to be similar, as both said that local labourers had to be used and not foreigners. He noted that Eskom had always put emphasis on using local labour and putting in measures to “up-skill” people. Was this project going to be fast-tracked?

Mr Bulunga replied that the strikes at Medupi and Kusile were not linked. The issues were completely different. The strike at Medupi included mostly skilled workers and at Kusile, mostly general workers were involved. In addition, he mentioned that Eskom had started training welders already, but it was going to take some time before they were properly skilled. Therefore, in the mean time, Eskom had to enforce the PLA. The PLA had to be signed by every worker and every organised union that was on site. This was the rule that was applied.

Mr Bulunga further explained that the strike was not a surprise; however, the violence was. Eskom had not expected that workers would have engaged in such violent actions. The strike was expected because the demobilisation of the 600 workers had put pressure on Eskom to find alternative ways of supporting them such as learnerships. Eskom also had to ensure that local labourers were not losing out in terms of the construction work.

Dr G Koornhof (ANC) noted that there was an electricity gap between now and when Medupi came into operation. Eskom had explained to the Committee, in a previous presentation, the risks that would exist regarding the energy gap for the next two years. He asked the utility to explain these risks again. Eskom had not referred to the incident that happened at Duvha power station. The Committee was taken by surprise when it heard about the situation there in February. He asked if Eskom would explain, sometime in the future, why the Committee had not been informed of the incident given that it was the oversight body. He also wanted to know what the implications were for Medupi and Kusile power stations following the labour unrest. How much time had they lost? He asked if the labour disputes between the contractors and workers had been resolved. Had they resolved the skills development problem? What was the status quo at this point in time?

Mr Lakmeeharan replied that, over the next two years until Medupi power station was built, the rate of increase of demand was anticipated to be higher than the rate of additional capacity that would come on line. Therefore the country faced a big challenge during this period. Eskom was also aware that it had to maintain its existing coal fleet. There were plans in place to deal with these risks but the country could not rely on Eskom alone. All South Africans had to contribute through energy efficiency measures and conservation. Eskom had to focus on its own plant performance and the country had to introduce other independent power producers, especially in the areas of core generation and renewable energy. There was also talk of a safety net that could be used as a mandatory energy conservation scheme as a last resort before load shedding. These were the risks that had been spoken about. Concerning this winter, Eskom was not planning on doing any load shedding; however, the situation was still risky and he did not want people to get comfortable. All South Africans had to play their part or the aforementioned risks could materialise. He appealed to all South Africans to assist Eskom in conserving energy. It was a good thing to for the environment as well as for the pocket.

Mr Lakmeeharan apologised that Eskom had not given Members information about Duvha when it had happened. Investigations were underway and he hoped they would be completed soon. Once the investigation was done, they would inform the Committee about the outcome.

Mr Steyn answered that Eskom was working towards recovering any time that was lost when the strike happened. The contractors had a contract with Eskom to achieve certain deliverables at a certain time. It meant that Eskom was “interfacing” the different contractors with one another in terms of their activities and access to certain parts of the plants. They needed access to do their work and carry out the required functions. For example, KCWJV at Kusile had to finish its work before the mechanical people could start building its mechanical structures on the foundations. Therefore, it was important for Eskom to get KCWJV to make up the lost time due to the strike. If this did not happen Eskom would be accountable for the lost time. It was a “contractual circle” that had to be managed at the end of the day.

The Chairperson concluded that labour matters were very complex and that the Eskom and the Committee had to look at these issues continuously to see what they could improve upon. Ongoing interaction with local government and the provinces was very important. People were aware that there were limited opportunities in the country and entities had to look at how they could benefit the local communities. He asked if, at the next meeting, Eskom could give the Committee an idea of how many job opportunities it had created and how many people it had skilled.

Mr Lakmeeharan replied that this information would be made available in Eskom’s Annual report.

Mr van Dalen added that there should also be a breakdown of how many jobs had been given to local labourers and how many had been given to foreign labourers.

The Chairperson thanked Eskom for their presentation.

The meeting was adjourned.