The current strike at Transnet will cost South Africa’s economy billions making the country’s financial position even worse – possibly triggering further rating downgrades, says the chief executive of Business Leadership South Africa (BLSA), Busi Mavuso.
Writing in her weekly letter, Mavuso said that mass strike action cripples the economy and deals a severe blow to government revenue and the country as a whole.
On 7 October, Transnet, the country’s port and freight-rail operator, declared force majeure across all its harbours as employees broke out in strike over wage increase demands.
In light of the strike, Transnet said: “To the extent possible, we will attend to invoke contingency plans and source external stand-in/temporary resources to ensure that the operations continue across the various terminals.”
The two striking unions, namely: the South African Transport and Allied Workers Union (Satawu) and the United National Transport Union (Untu), have rejected the original 1.5% wage increase offer and a revised offer of 4%.
The unions argue that annual inflation is at 7.6% and paired with the rising cost of living, more is needed.
Many industries, including the mining sector, rely heavily on the company’s infrastructure and import and export systems.
“Miners and many other companies are losing billions while this goes on, with early estimates putting the costs at R6 billion per day,” said Mavuso. The unions have said the strike is indefinite, and 15,000 workers are not going to be working today (10 October) – all ports and freight rail are not expected to operate.
One of South Africa’s mining giants Kumba Iron Ore, a subsidiary of Anglo American, said that it expects a production drop of 50,000 tons per day, increasing until roughly 90,000 tons are lost each day – due to the strike action, reported the Daily Investor. Export sales are also expected to decrease by 120,000 tons daily.
Mavuso said that 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, she added.
“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,” said the CEO.
She said that the strike 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.
South Africa has already seen a myriad of downgrades. International figureheads such as Moody’s Investors Service have placed the country two steps below investment grade, while S&P Global, alongside Fitch, ranked the country three steps below, according to Bloomberg.
A recent report has shown that strike action costs the country billions. Lost work days due to strike action have risen more than 30-fold in the six months through June compared with the same period year-on-year, reported Bloomberg.
Data from the latest South African Reserve Bank’s Quarterly Bulletin showed that the country lost 1.6 million work days due to industrial action in the first half of 2022, up from 45,000 in the prior year.
Speaking on the Transnet strike, Mavuso said that South Africa had been hit with 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 the 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,” she said.
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