Telkom CEO Sipho Maseko
Photo by: Duane Daws
In light of a court order halting its restructure process, telecommunications group Telkom has abandoned its Section 189 process in favour of voluntary retrenchment packages for non-union members and the implementation of restructured working terms to continue its cost containment programme.
Last week, the Labour Court’s Judge David Gush ruled in favour of Solidarity, ordering the JSE-listed firm to stop its restructuring and retrenchment process and reach a settlement with trade unions before continuing the programme that would affect nearly 8 000 employees.
“We have to take [other] decisive actions [while engaging organised labour] to curtail further business losses and have, therefore, decided to look at a number of cost containment options,” Telkom CEO Sipho Maseko told media on Monday.
In its current state, despite the improved performance in the 2014 financial year, the company was “simply not sustainable” and more work was required.
“One swallow does not make a summer,” he said, pointing to the fragility of Telkom amid “serious” business risks and heightened competition.
Maseko also pointed to the almost equal offsetting effect of 6% inflation, which added R1-billion a year to costs – the targeted amount Telkom aimed to cut each year.
Telkom would now investigate new measures, to be initiated “as and when required”, including a wage freeze across the entire company; flexible working hours; new methodologies to improve productivity; upgrading employees’ skills; introducing a shorter work week to reduce employees’ working hours; examine outsourcing options; and offer attractive voluntary severance packages and voluntary early retirement packages.
The packages, which were “significantly more generous” than those required by law, would be available immediately – until July 27 – for all non-unionised workers, which represented 40% to 45% of Telkom’s workforce.
Telkom aimed to engage unions over the new initiatives, as well as seek consent to extend the voluntary retrenchment packages to union-affiliated workers, within the next week.
The now-retracted Section 189 issued in June to unions would have resulted in the retrenchment of around 4 400 employees and around 3 400 more employees being outsourced to other companies or participating in an enterprise development programme.
Maseko explained that Telkom’s revenue-to-staff cost ratio, at 28%, was significantly higher than industry norms of 7%, with 30% more full-time employees when compared with similar-sized telecommunication companies.
“This makes it increasingly difficult for us to compete,” he said, noting that, while Telkom’s 2.0 programme delivered benefits, it was not enough.
Over the past 18 months, Telkom had renegotiated contracts worth over R10-billion, sold all noncore properties worth more than R750-million, consolidated its head office into a single location and closed nonperforming stores, besides others.
“We have to make the difficult decisions now to safeguard the future livelihood of the majority of our employees and to ensure the company remains an important contributor to economic growth, an attractive investment for shareholders and a vehicle for social transformation,” he concluded.