‘Arrears award will create $1bn deficit’

Business Reporter
POWER utility Zesa Holdings has pleaded with workers to accept a grossly diluted salary arrears offer arguing implementing the order from a collective bargaining arbitral award would leave it with close to $1 billion deficit.

Zesa said in view of its financial limitations and potential impact of complying with

the ruling from the 2012 CBA arbitration process, it had mandated management to plead incapacitation, as the only practical way forward. The utility was ordered by an independent arbitrator to its 2012 CBA dispute with workers to place its employees on national employment council salary scales.

Zesa was also ordered to re-grade employees on a salary scale arising from the 2012 collective bargaining exercise so that all its workers fall under NEC grades.

Further, the power utility was directed to remunerate its employees in line with the arbitral award. While it has complied with the first two, it says back dating salaries in line with the CBA award would cripple its operations.

“Management has computed the financial implications that arise from implementing the award. The total back-pay amounts to $118 million,” Zesa said.

The incremental payroll cost for 2015 would be $68 million.

“Implementing the arbitral award will worsen the company’s financial performance. The net liability position, at $422 million in 2012 will worsen to $922 million in 2015. The financing gap for the year will amount to $182 million.

“In view of the situation, the board of directors of Zesa Holdings has mandated management to plead incapacitation from implementing 2012 the CBA.”

Zesa said it did not have the capacity to implement the award, pointing out that while it had been able to pay salaries on time, it was constrained.

The group said to mitigate the effects of the implementation of the award on NEC graded employees, the Ministry of Energy and Power Development had approved an open settlement offer for Zesa and its units.

“This offer is open to employees graded D3 and above. The total value of the settlement offer being made to employees is $21 million,” Zesa said.

The power utility said the scheme was optional and a once-off payment. It said employees willing to accept the offer were set to be paid end of March.

Zesa Holdings salary arrears problems with its employees started in 2012 when the energy utility company refused to offer its employees wages based on Statutory Instrument 50 /12 after that year’s CBA.

The Statutory Instrument spelt out that the least paid worker in the energy industry, Grade A11, would be paid a basic salary of at least $275 per month.

Following the award, Zesa carried a job validation, rationalisation and re-grading exercise. It says this took into account similar exercises in 1998, 2003 and 2006. As a result, certain jobs were found to be incorrectly graded.