31 May 2011

Labour Unrest at Eskom’s Kusile and

Medupi Power Station Projects

Portfolio Committee on Public

Enterprises

Contents

• Purpose of the presentation

• Context of the New Build Programme

• Kusile Power Station Project

• Medupi Power Station Project

• Conclusion

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Purpose

• To provide comprehensive background on the recent labour unrest in Medupi and Kusile Power Station projects

• To share feedback on the sequence of events

• To share mitigation plans in place

• To highlight the current situation

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Eskom Power Stations

Medupi PS

Kusile PS

Ingula PS

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Construction Timelines

Medupi Power Station Kusile Power Station May • Construction started in May 2007 Construction started in April 2008 • Construction started in May 2007 Construction started in April 2008

• Last unit on load in 2015 Last unit on load in 2018 • Last unit on load in 2015 Last unit on load in 2018

• First concrete poured in July 2008 First concrete poured in March 2009 • First concrete poured in July 2008 First concrete poured in March 2009

• First lift shaft completed in August 2009 First lift shaft complete in April 2010 • First lift shaft completed in August 2009 First lift shaft complete in April 2010

• First unit on load in 2012 First unit on load in 2014 • First unit on load in 2012 First unit on load in 2014

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Project Labour Agreement

• All employees doing construction work on sites are employed by the contractors, not Eskom.

• Eskom’s New Build projects are governed by the Project Labour Agreement (PLA) signed by the contractors, Employers organisations and the six recognised Industry Trade unions

• The PLA makes 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 is the consultation by contractors with organised labour on the use of expatriate labour

• Furthermore, contractors are required to show that recruitment drives have been held within South Africa and that a shortage of skilled resources is proven. In addition, contractors need to implement skills transfer programmes between foreign craft and local labour

• The area where there is currently challenges on supply of local labour is the supply of suitable skilled welders for both the boiler and turbine contracts at both Medupi and Kusile

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.

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Kusile Power Station

Background

• 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 the Roshcon (Contractor) employees that the contractor’s management accept a memorandum, detailing their demands, with the Eskom Project General Manager as a witness

• The second event relates to the application of the “no work no pay” principle detailed in the Kusile Project Labour Agreement (hereafter PLA) by the Kusile Civil Works Joint Venture hereafter (KCWJV) contractors management

• This was an illegal strike2011/05/31 9

Roshcon employees demands

• We demand the training to all unskilled labourers to the relevant skills

• W e demand 45% of female employees to be trained in the relevant skills

• We demand re- employment to all local employees to new coming and current contractors here in Kusile Project

• We also demand the first preferences to all Kusile Learnership

• We need to establish a committee that will work direct with Eskom Information Centres (Recruitment Centres)

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Sequence of events (1)

18 APRIL 2011

A verbal unofficial notification of an impending protest action was received by Roshcon employees shop steward indicating that employees wanted to hand over a memorandum

19 APRIL 2011

Roshcon employees “clocked in” and subsequently returned to the picketing area situated outside the main entrance to site

 02 MAY 2011

Kusile Executive Team (KET) met with all Kusile Principal Contractors on site to share Kusile safety plans as well as to understand what the contractors plans were for the return of employees on the 3 May 2011 after Worker’s Day long weekend

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Sequence of events (2)

04 MAY 2011

Roshcon employees handed in a memorandum to their management in the presence of Eskom management as per the workers demand

KCWJV employees went on strike in sympathy of their Roshcon counterparts

06 MAY 2011

KCWJV employees reported for work but did not commence with their normal duties. Labour requested feedback from KCWJV Industrial Relations Officer regarding the PLA “no work no pay” principle

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Damages to site

Stoning of vehicles

11 contractor vehicles (5 near KCW yard and 6 near Roshcon yard) were set

alight, 6 offices and 2 large cranes

Looting of offices and stores (Roshcon, KCWJV and Capacity)

The west wing of the KCWJV Office bock was set alight

Roshcon offices were also set alight

There were no injuries

* All damages were focused on the above mentioned contractors

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Current situation

• Site is open and operational

• All contractors are back on site except for Roshcon and KCW

• Affected contractors are 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

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Risks and treatment strategies

Contractor Employees (Risks)

•If the contractors cannot reach an amicable agreement with the employees as soon as possible, that will result in delays in delivery from the contractors

Contractor Employees (Treatment)

•Contractors to go through normal disciplinary action as per the Project Labour Agreement (PLA)

•Eskom ensured that the site is cleaned up before workers returned

•Additional security measures have been put in place (Installation of

cameras)

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Medupi Power Station

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Background

• Site activities ceased and project employees were evacuated from site following the violent protest by contractors’ workers that took place on Tuesday, 10 May 2011

• This event was a 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 claims made are such that these aforementioned trades are not scarce in South Africa and such opportunities were supposed to have been given to fellow South Africans

• This was an illegal strike

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Sequence of events

• Tuesday, 10 May 2011 approximately 500 workers belonging to Murray & Roberts Projects (MRP) a sub contractor to Hitachi went on a violent protest on site

• Stone throwing, intimidation and unprecedented violence erupted

• The number of protesters grew rapidly and site was unsafe

• Medupi currently has approximately 11 000 workers, all other employees were safely evacuated

• Law enforcement agencies were called in to deal with the situation

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Damages to site

• An office was burnt down

• A bus was burnt down

• Three cars were overturned

• Two cars were burnt down

• Millions of rands in loss of production

• To date, only 11 minor injuries were recorded and were mainly due to stone throwing

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Current situation

• Site restriction was lifted on 16 May 2011

• Contractors gradually mobilised

• As of 27 May 2011 the site was progressively operational, with over 8 000 workers reporting for duty, other workers were to be in the afternoon shift

• Police presence is maintained until site is fully normalised and safe

• Hitachi MRP employees have signed an agreement to return to work and have acknowledged disciplinary action as well as further disciplinary requirements on site

• Organised labour have been consulted on the remobilisation process and conduct of their employee

Current situation (Cont.)

• Criminal charges of arson, public violence and attempted murder were

laid with the police and 4 suspects were apprehended

• One suspect handed himself over to the police on the 27th May 2011

• All suspects are out on R5 000 bail and must report to a nearest

police station every Sunday

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ConclusionConclusion

• There has been overwhelming support from Provincial and Local Government and other key stakeholders throughout this period

• The contractors are given a chance to resolve issues with their employees

• There are continuous engagements with key stakeholders including surrounding communities

• Eskom and contractors will use valuable lessons learnt to prevent or better deal with future incidents

• Eskom is working towards recovering lost time so that Eskom meets its commitment of project delivery by 2012

• The delivery of the two projects is not under threat as a result of the strike