Transnet strike ‘most appalling act of economic sabotage’

The ongoing Transnet strike has been described as an appalling act of economic sabotage that will set back the country’s recovery, costing the economy billions and robbing government of the resources needed to provide poverty relief. 

The strike action makes Transnet’s financial position far worse and could trigger further ratings downgrades, writes Busisiwe Mavuso, CEO of Business Leadership South Africa.

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.”

Mavuso says in addition, Transnet 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. During salary negotiations, Transnet offered 3% increases and a R7 500 gratuity, money which Mavuso says it already cannot afford. Unions are demanding a 13.5% increase.

ALSO READ: Transnet strike: 95% of South Africa’s economy will be directly negatively affected

Transnet strike causing losses for mining

“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 that could have covered in part an extension of the social relief from distress grant.” 

Against that background, she says, the decision of the 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 the 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.”

She warns that miners and many other companies are losing billions, with early estimates putting the costs at R6 billion per day. “The unions say the strike is indefinite and 15 000 workers are not going to work today. Today all ports and freight rail are not expected to operate.”

ALSO READ: Mining sector would be hardest hit by Transnet strike, says economist

Transnet strike disastrous for economy

Mavuso says this is disastrous; not only to obvious sectors linked to direct imports, such as the medical sector and exports, such as the mining sector, but to the entire, interconnected economy, further damaging South Africa’s brand, with global cargo operators likely already moving on to other ports and further deprioritising the country. 

“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. Several companies approached Transnet with potential solutions, including willingly offering to pay increased fees for Transnet services.”

She says other options include declaring port workers as essential workers and given the economic situation, this is an option to seriously consider as the whole country could collapse without ports operating.

ALSO READ: Transnet strike costing SA ‘hundreds of millions of rands every day’

Labour not stepping up with solutions

“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, she says, we are dealt a severe body blow without warning, risking tipping the economy further into the abyss. Mavuso believes the strike will be in vain as there is simply no money to meet union demands.

“For all of us affected, 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.”