As the country’s ports have ground to a halt by the Transnet strike, experts have warned that a proposed wage hike could plunge the state-owned entity into a deeper financial crisis.
Although the exact economic impact of the crisis was not yet clear, economists have warned consequences for the economy be dire.
Apart from goods trickling through privately operated terminals, activity at ports across the country ground to a halt.
Western Cape MEC for Finance and Economic Opportunities Mireille Wenger said as of Friday three container vessels had berthed and four were waiting to berth at Cape Town port since the strike began on October 6.
Turnaround time, including waiting time to berth, is normally four days.
“Since the beginning of the strike, at least four vessels have indicated that they are omitting Cape Town. But the privately operated terminal is not affected by the strike,” said Wenger.
Other reports indicated that, as of October 13, more than 30 vessels were stuck outside Durban port, and more than 30 outside Richards Bay.
According to a report commissioned by the provincial Department of Finance and Economic Opportunities on the functioning of the ports, Cape Town port’s direct economic impact on provincial GDP is estimated at just more than R45.7 billion.
This week, the Commission for Conciliation, Mediation and Arbitration proposed a three-year deal that included a 6% wage increase for the current year and the third year, and a 5.5% increase for the second year, to end the strike.
However, the United National Transport Union and the South African Transport and Allied Workers Union are demanding an increase in line inflation 7.6%, as well as a commitment to freeze retrenchments for three years.
President of the Cape Chamber of Commerce and Industry Jacques Moolman expressed concern about the “disastrous direct and indirect impacts of the strike”.
“Research conducted by freight forwarders shows that logistics delays cost the economy between R100 million and R1 billion a day. But the total cost to the economy is much bigger than that,” said Moolman.
He added that the SA Revenue Service’s merchandise statistics also showed that goods worth R343 billion were traded through imports and exports in August, of which around 70% were processed via the ports.
“Inactivity at the ports blocks goods worth around R8 billion each day. The ripple effects of this disaster will touch all South Africans, not least because it feeds into our energy crisis, our food-supply system, our health-care system – and just about every other sector.
“Numerous members have expressed concerns about potential product shortages, including a possible shortage of medical supplies, fuel, and components needed for manufacturing, including for renewable energy projects,“ said Moolman.
He said the cost to Transnet of a 7.6% (CPI) wage increase equated to less than the cost of a single day of strike disruption.
“Figures suggest the cost to the economy has already been 15 times as much as acceding to a CPI wage increase. From a chamber perspective, this makes no sense.“
While Transnet is counting its losses, business for air charter services is booming.
CEO of Air Charter Services South Africa Lyndee du Toit said there had been a spike in demand for air charter services to move perishable products sitting at the ports owing to the strike.
“I expect that there will be more customers looking to fulfil their transportation needs with the current port strike and the backlog that is currently building at the ports,” said Du Toit.
Du Toit said the biggest concern for customers was the price, as it cost more to transport goods using air freight.
“They have budgeted on one price point, but now some must move to air-freight solutions, as they cannot afford not to deliver on time. But some have contracts signed in advance to deliver for export and might lose them if they are unable to fulfil on time,” she added.
Economist Dawie Roodt said that, even though lost production could be recovered, damage was also caused to future investments, as the economy was now expected to grow by less than the projected 1-1.5%.
Roodt also warned that Transnet buckling to an inflation-linked wage hike would be “fatalistic”.
“We are already suffering from the attitude of paying them more to get them to shut up. But there has to be a line in the sand.
“The private sector has lost more than 1 million jobs in South Africa. Millions more had to take cuts in salaries, while some companies closed down due to the economic environment. They took the knock on their chins.“
Political analyst Jakkie Cilliers said the only conversation organised labour and Transnet should be engaging in was one on the company’s future growth.
“What Transnet needs to do is to right-size in terms of its staffing complement and move towards excellence if it wants to run an efficient service. It needs to be run on a semi-commercial basis, to add value and grow the broader economy,“ said Cilliers.
Labour expert Patrick Deale said if Transnet were to accede to demands, it would be doing so to settle at any cost.
“The reality is that everyone loses. If Transnet buckles to the demand and gives in, the costs are massive to the country, and there will be consequences,” said Deale.
“Each week the workers are on strike, they lose money that they may not be able to recover.“
Deale said that, while an inflation-linked increase might appear reasonable to unions, Transnet could not afford it.
“However, Transnet has (incurred) huge losses and suffered from bad management, corruption and state capture, and this has undermined (its) ability to provide services and plan ahead for infrastructure required to expand the economy.
“Transnet is running on a deficit and has to meet the future needs of expansion. The state as a main shareholder is imposing austerity measures on the economy. Transnet’s offer in that context is in a conundrum.”
