South Africa

R100 billion value destruction in the mining sector to get worse

Cosatu strike

A wage strike at South Africa’s port and freight-rail operator that’s curbing mineral exports is set to worsen as members of more labour unions join the protest.

The United National Transport Union, the majority labour group at state-owned Transnet, began the strike on Oct. 6. The South African Transport and Allied Workers Union, the second-biggest employee group, and other smaller unions will also halt work from Monday, Cobus van Vuuren, Untu’s general secretary, said Sunday in an interview.

Transnet, which operates the nation’s industrial ports and freight rail network and fuel pipelines, has declared force majeure on shipments because of the labour action.

“Today, all ports and freight rail are not expected to operate,” Busi Mavuso, the chief executive officer of lobby group Business Leadership South Africa, said in a note on Monday. “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.”

Kumba Iron Ore Ltd. said the disruption would impact its 120,000 tons a day of export sales. The output will be hobbled by 50,000 tons a day for the first week of the strike and jump to 90,000 tons after that, according to a company statement.

Thungela Resources, South Africa’s biggest shipper of thermal coal, has said a prolonged strike of two weeks would curtail as much as 300,000 tons of export production. The movement of chrome, manganese and other bulk commodities will also be impacted.

Shares of Kumba fell as much as 3.9%, the most in a week, on the Johannesburg Stock Exchange on Monday, while those of Thungela dropped as much as 4.1%.

The labour dispute also poses a risk to South Africa’s food, fibre and beverages industry, said Wandile Sihlobo, chief economist at the Agricultural Business Chamber of South Africa.

Wage Demands

“The fourth quarter of the year is as busy as any other quarter in terms of trade,” he said in a note. “Stoppages would negatively affect both imports and export activities. The actual costs of it, however, will depend on the duration of the strike.”

Transnet and the unions will hold a meeting on Monday to be facilitated by the Commission for Conciliation, Mediation and Arbitration, according to the company. It has urged workers to accept its wage offer of as much as 4%. Workers are demanding increases of 13.5%.

Transnet’s deteriorating performance was curtailing shipments even before the strike, costing the state money that could fund programs to help the poor, BLSA’s Mavuso said.

The mining industry estimates that “it could have generated another R100 billion in revenue were it not for capacity constraints on Transnet rail and ports,” she said. “That money would have generated another R27 billion in tax revenue.”