The economic impact of the Transnet strike
Updated: Aug 21
Our economy relies highly on the trade of commodities, and Transnet is an integral part of South Africa’s infrastructure-led growth plan. The current strike at Transnet is crippling the already fragile economy. The Mineral Council of South Africa implores immediate resolution to the strike action as the council estimates that South Africa exports about 476 000 tonnes of bulk minerals daily, worth R1.06 billion. Under the current strike action, they estimate that 120 000 tonnes of minerals worth R261 million are being exported daily - exporting harbours are operating at 12 and 30 per cent of capacity.
SA Transport and Allied Workers Union (Satawu) and the United National Transport Union (UNTU) are the two unions negotiating for at least inflation-level increases (7.6 per cent) for Transnet workers. On 18 October 2022, UNTU agreed to a three-year wage increase, thus ending the strike action of their members. The settlement UNTU agreed to includes a 6% increase to the basic wage in year one, a 5.5% increase in year two and a 6% increase in the third year. The settlement also includes an increase in the medical aid subsidy for employees and an increase in employees’ housing allowance. UNTU comprises 53.9 per cent of Transnet union members. Satawu considers this agreement by UNTU as a betrayal of workers’ rights as it is below inflation and encourages members to continue the holdout but were forced to return to work on 20 October 2022 due to the Labour Relations Act. Section 22 of the Labour Relations Act says that if the majority signs an agreement, that agreement is extended to a minority.
Transnet’s CEO, Ms Portia Derby, expects the strike-induced backlog will take between six and nine weeks to clear, while the South African Association of Freight Forwarders (SAAFF) suggests that complete return to normality will only occur in 2023. SAAFF estimates that the 11-day strike has resulted in South Africa losing the opportunity to transport R65.3 billion worth of goods. In contrast, the strike-induced wage increases will cost Transnet R1.5 billion per annum. Transnet employs over 40 000 workers. Around 66 per cent of its budget is allocated to employee compensation. How these increases will be financed in the strained fiscal environment is a great cause for concern. Finance Minister Enoch Godongwana suggests that Transnet receives financial assistance from the government. Next week’s Medium-Term Budget Policy Statement will provide details on this and the highly anticipated announcement of an Eskom debt transfer.
As measured by delivered tonnages against contracted rail tonnages, the Mineral Council forecasts an export loss of R50 billion for this year based on iron ore, coal, chrome, ferrochrome and manganese exporters. The immense export loss amplifies the country’s current economic crisis as businesses, and the mining sector is expected to lose billions in trade. This caused a disruption in economic activity and tax revenues. According to the Mineral Council, had Transnet been running at optimal capacity, South Africa could have gained R151 billion in additional exports, with the mining sector increasing employment between 40 000 jobs to 500 000 jobs through further economic activity. Transnet would experience immense revenue increases in this case, and the government would receive high tax windfalls to benefit the fiscus.
The current Transnet strike highlights the volatile socioeconomic structure of the economy. Citizens struggle to keep up with the increasing cost of living, inflation and interest rates. While, businesses in private and public sectors are barely keeping afloat and cannot afford wage increases. The deepening inefficiencies of South Africa’s infrastructure and state-owned enterprises are compounding and leaving the country in crisis. The government must implement immediate interventions to improve efficiency at SOEs, as it is impossible to rely on an infrastructure-led economic growth path with crumbling infrastructure.