South Africa: Ramaphosa headache as unions warn of new strikes

By Xolisa Phillip, in Johannesburg

Posted on Monday, 31 October 2022 12:44
South Africa's President Ramaphosa and Germany's Chancellor Scholz hold joint news conference
South Africa's President Cyril Ramaphosa attends a joint news conference with German Chancellor Olaf Scholz (not pictured) during his state visit to the government's Union Buildings in Pretoria, South Africa, May 24, 2022. REUTERS/Siphiwe Sibeko

As South Africa counts the cost of recent industrial action at Transnet, public sector workers have signalled their intent to down their tools because of faltering wage negotiations with the government.

The strike at Transnet hobbled the country’s logistics network – from rail to ports and even container terminals.

It cost the economy an estimated R8bn ($440m) in cargo value daily, raising concerns of an imminent technical recession.

In the second quarter of 2022, the country’s economy contracted by 0.7%, dragged down by manufacturing (-5.9%) and agriculture (-7.7%) as well as a slowdown in mining, according to GDP data released by Statistics South Africa in September.

Another contraction in the third quarter of 2022 would mean the South African economy has entered into a technical recession – defined as two consecutive quarters of negative growth.

Transnet has since lifted a force majeure declared earlier in October on automotive, bulk, and multi-purpose terminals, but it remains in place on container terminals because of strike-related backlogs.

According to industry forecasts, for each day of the almost two-week long strike at Transnet, it will take an average 10 days to recover port and container terminals to normalised levels.

Agriculture, automotive, chemicals, forestry, mining, and retail were some of the worst-affected sectors by the strike, says Tanya Cohen, the convenor of the Public-Private Growth Initiative and a commissioner at the National Planning Commission.

South Africa is a small, open economy, says PwC economist Christie Viljoen. “This implies it is connected with the rest of the global economy and is dependent on international trade and investment.”

“The country’s mining and manufacturing sectors, and parts of the agricultural industry, are heavily reliant on export revenues,” says Viljoen. “These income streams are directly dependent on the efficient functioning of port systems in order to move products on time and in a cost-efficient way.”

The risks arise because minerals from the mining belts are mostly transported on the rail network for shipment via the ports of Durban and Richards Bay to clients across the world. Similarly, manufactured goods like vehicles and heavy machinery depend on container shipments while farming products are a time-sensitive product to move.

Purchasing power

On the employee side, Viljoen says workers are facing a financial crunch because of the diminishing buying power of their salaries, which has been eroded by rising consumer price inflation (CPI).

Viljoen points to the BankservAfrica Take-Home Pay Index, which shows that in the four months to August 2022, the nominal value of take-home pay declined by an average 1.2%.

“When adding the impact of inflation on what this money could buy, purchasing power was down 7.5% year-on-year during the period,” says Viljoen.

We reiterate our position that an amicable solution should be found to avert … strike [action] that will impact service delivery and undermine the economy

The Transnet strike was led by the United National Transport Union (UNTU), the majority labour formation representing 24,992 members comprising 53.9% of bargaining unit employees at the company. UNTU entered into wage negotiations with Transnet demanding CPI-linked increases.

Members of the South African Transport and Allied Workers’ Union (SATAWU), the minority, also embarked on industrial action making similar demands.

Cost of labour

Following hard-line bargaining, Transnet inked a three-year wage agreement with UNTU, effective 1 April 2022 to 31 March 2025, in terms of which:

  • Employees will receive a 6% increase in basic pay in the first year; a 5.5% raise in the second year; and a 6% upward pay adjustment in the third year
  • Transnet will raise employees’ medical aid subsidy, in line with the basic wage increase, and housing allowance
  • For the period 1 April to 30 September 2022, employees will receive back pay in two tranches – in November 2022 and January 2023

Transnet has extended the terms of the agreement to SATAWU. The company can make such a move because collective bargaining operates along majoritarian principles.

In the year ended 31 March 2022, personnel costs amounting to R26.1bn made up more than 50% of Transnet’s R45bn net operating expenses, according to information in the company’s integrated report.

Transnet also reports a permanent employee headcount of 46,086, down from 49,642 in 2021. Total headcount, which includes contractors, is 50,015 in 2022, down from 55,827 in 2021.

Fiscal fight

In another equally important part of the economy, public sector employees are preparing for battle after finance minister Enoch Godongwana on 26 February 2022 tabled a 3% wage offer in the medium-term budget policy statement (MTBPS), well below workers’ 10% demand.

In the extended MTBPS documents, the National Treasury notes that South Africa’s public-sector wage bill is higher than its peer countries, and is one of the highest among emerging markets.

“South Africa’s public sector wage bill is about 5 percentage points greater than the Organisation for Economic Cooperation and Development average as a share of GDP,” the Treasury says.

“Higher-than-budgeted public-service wage costs would strain fiscal resources. Additional fiscal measures, or reductions in headcounts, would be required to contain overall compensation spending.”

However, South Africa’s public unions are not convinced.

The 235,000-member Public Servants’ Association (PSA) served a strike notice on 24 October 2022, and will be eligible for the industrial action seven days from this date.

The PSA’s response to Godongwana’s pronouncement on public sector workers’ wages is that the government has made a mockery of orderly collective bargaining.

The Congress of South African Trade Unions (COSATU) has cautioned the government against “negotiating in Parliament when the conciliation process at the Public Service Coordinating Bargaining Council is pencilled for Monday 31 October 2022”.

“We reiterate our position that an amicable solution should be found to avert … strike [action] that will impact service delivery and undermine the economy,” COSATU says.

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