South Africa held hostage by unions who threaten strike action

South Africa’s economy is being held hostage by unions who threaten strike action to disrupt critical services to secure significant wage increases from government departments, state-owned enterprises (SOEs), and private companies. 

Many of these increases exceed inflation and do not correspond to higher productivity from employees. 

This is feedback from Business Leadership South Africa (BLSA) CEO Busisiwe Mavuso, who said that the wage agreement between Transnet and unions appears to indicate a failure of leadership. 

After several rounds of negotiation, Transnet and the United National Transport Union (UNTU) agreed on 6% annual increases for employees at the utility for the next three years. 

UNTU secretary-general Cobus van Vuuren said the agreement showed the power of collective bargaining in improving the conditions of the working class. 

The agreement provides for an annual 6% increase, as well as a 6% increase for housing allowances and medical subsidies. 

It also included a firm, non-mandatory retrenchment clause to prevent job losses resulting from the increases. 

Mavuso disagrees with Van Vuuren’s perspective on the matter, saying that the outcome would put additional financial strain on Transnet at a time when Moody’s warned that it is running out of cash. 

“This is quite unfortunate. As much as I place a lot of blame on the leadership of Transnet, I place even more blame on the unions,” Mavuso told Newzroom Afrika. 

“My biggest disquiet is really with the unions, who are seemingly holding the country hostage with strike threats.” 

Mavuso stated that unions demonstrate a complete disregard for the economic factors that affect all South Africans. 

“This is economic blackmail that we are experiencing here, and taxpayers are footing the bill while the economy suffers.” 

“It does not make sense to me that Transnet would give increases that are double the current inflation rate in this environment when the utility cannot even afford to wipe its own nose.” 

Transnet on the edge

Transnet is at risk of running out of money for operations and debt servicing, with Moody’s Ratings warning in May that it had three months of cash flow left unless it received a government bailout. 

The ratings firm has placed Transnet on review for a possible credit downgrade, citing concerns over its “unsustainable” capital structure, deteriorating liquidity position, slow pace of operational improvements and absence of support from the government.

South African taxpayers came to the rescue after this warning, with the National Treasury and the Department of Transport agreeing to provide a R51 billion guarantee facility to the company. 

These funds, released at the end of May, were available immediately to Transnet to support its investment programme and ensure it met debt obligations. 

Transnet currently has a debt pile of over R130 billion and is implementing a turnaround plan to improve its operational efficiency. 

It has also begun to consider utilising private sector players to operate some of its port terminals and rail corridors using a concession model. 

Mavuso said that the majority of Transnet’s debt is also coming due within the next five years, with R100 billion of redemptions payable in the short term. 

Moody’s and S&P Global Ratings both have Transnet on a credit watch for a ratings downgrade due to its deteriorating liquidity and unsustainable capital structure. 

“So, on what basis does an institution in that position commit to a 6% increase? Not only did they commit to a 6% increase, but they committed to not retenching any workers,” Mavuso said. 

“If you look at what is happening in the private sector, companies are not giving 6% increases. They are only giving cost-of-living adjustments, which are around 3%.” 

Mavuso also said that it is unwise for a company to commit to not retrenching workers amid a highly volatile economic environment. 

Committing to such a clause gives Transnet limited flexibility in the future to restructure its workforce and improve efficiency.