‘The Transnet strike is going to cost the economy billions’

Moneyweb

The economic crisis we have been trying to confront, one that has rendered most of our youth unemployed and seen real per capita incomes falling for eight years, requires a concerted effort between all social partners. Organised business has been seized with the challenge – partnering with government to create the Solidarity Fund when Covid struck, working to mobilise resources to support many areas of the public sector where critical skills are needed, from the energy sector to the criminal just system. This has required the mobilisation of huge amounts of money to ensure we can drive an economic recovery.

Yet as we have been doing all this, we were confronted last week with the most appalling act of economic sabotage. The Transnet strike is going to cost the economy billions. It is going to set back our efforts to drive a recovery. It will damage government revenue, robbing it of the resources needed to provide poverty relief.

The mining sector has calculated it has lost R50 billion so far this year due to Transnet’s deteriorating performance. It reckons it could have generated another R100 billion in revenue were it not for capacity constraints on Transnet rail and ports. That money would have generated another R27 billion in tax revenue, revenue that could have covered in part an extension of the social relief from distress grant.

Against that background, the decision by United National Transport Union (Untu) and the South African Transport and Allied Workers’ Union (Satawu), to go on strike last week, in the middle of negotiations that were ongoing at the CCMA, is another severe blow to the economy. The strike is at very least an act of bad faith given negotiations were under way at the time and several court cases are testing its legality. It caught both Transnet and government off guard.

It forced Transnet to suspend all activity in its ports, snarling up imports and exports for the whole country. Miners and many other companies are losing billions while this goes on, with early estimates putting the costs at R6 billion per day. The unions have said the strike is indefinite and 15,000 workers are not going to be working today. Today all ports and freight rail are not expected to operate. This is disastrous not only to obvious sectors linked to direct imports like the medical sector, and exports, like the mining sector, but to the entire, interconnected economy. It further damages SA’s brand, with global cargo operators likely already moving on to other ports and further deprioritising SA. This is very bad news indeed.

And what is the fight about? Transnet, like other state-owned enterprises, is in financial dire straits. Revenue for the 2022 financial year was still R6.5 billion below pre-Covid levels. It made a R5 billion profit, only due to the revaluation of its assets that allowed it to book R10 billion in gains, including a R6.6 billion gain in the value of its rail infrastructure. It is carrying almost R130 billion in debt, with ratings agencies reviewing its credit ratings for downgrades. Personnel costs for the last financial year were R26.2 billion. In salary negotiations with workers it has now offered 3% increases and a R7,500 gratuity, money which it already cannot afford. On the other side, unions are demanding a 13.5% increase.

The strike action makes Transnet’s financial position far worse. It could trigger further ratings downgrades.

It also cripples the economy and deals a severe blow to government’s revenue. Over the weekend news came that both sides had agreed to a new CCMA process at mediation. This is a step in the right direction, but the strike should be suspended immediately while engagement happens.

Several companies have approached Transnet with potential solutions including willingly offering to pay increased fees for Transnet services. There are also further legal options including declaring port workers to be essential workers. Given the economic situation we are in, this is an option to seriously consider. Without ports operating the whole country could collapse.

In our joint effort to turn around our country’s performance, the missing party has been labour. Where are the unions’ ideas on how to improve productivity and Transnet services to deliver some of that R100 billion in additional output that could have been delivered this year? Where is the commitment to resolve blockages in the logistics systems? Where is the effort to fast-track planned port restructuring and rail public-private partnerships to improve performance and capacity?

Instead, we are dealt a severe body blow without warning, risking tipping the economy further into the abyss. It will be in vain – there simply is no money to meet union’s demands. For all of us being afflicted, it is a terrible blow. But perhaps the largest blow is to the standing of Transnet’s unions as credible partners in the effort to resuscitate this economy.

Busi Mavuso is CEO Business Leadership South Africa.