Giving in to the unions makes it difficult to hold Transnet, the SOE that can grow the economy, to account.
Transnet capitulated to unions threatening to strike last week and awarded annual pay increases of 6%, showing a lack of leadership on both sides of the table, with militant unions holding the country hostage with strike threats and management caving in to their demands without a fight.
Busisiwe Mavuso, CEO of Business Leadership South Africa, writes in her weekly newsletter that this scenario shows that the country needs serious action and leadership from government to push Transnet in the right direction.
“While South African businesses slash costs and workers face retrenchments, Transnet workers will get pay increases of double the inflation rate, funded by taxpayers already struggling to make ends meet.
“Inflation is running at 2.8% and the economy is expected to only grow by 1.4% this year. The news came days after National Treasury agreed to give Transnet additional guarantees to enable it to manage its huge debt pile.”
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Transnet’s logistics nightmare causing layoffs in the private sector
She points out that the bleak economic outlook is leading to severe belt-tightening in the private sector, with managers everywhere having to find ways to save and hoard cash to trade during tough conditions.
“Inevitably, some firms are going to fail, and workers will find themselves out of a job. Yet the unions threatened to bring the entire logistics network to a standstill unless their excessive demands were met, showing complete disregard for the economic factors that affect us all.
“It is even more shocking when you consider the role Transnet plays in perpetuating our economic predicament. Transnet’s poor performance has been a major contributor to our dismal growth outlook.
“Stellenbosch University professor Jan Havenga estimated that Transnet costs the economy R1 billion every day due to its poor performance in moving goods around the country and out through our ports. That is equivalent to wiping out the entire annual budget of a midsize municipality every day. It equates to about 5% of gross domestic product (GDP).”
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Transnet inefficiency affecting Goodyear, SAB and mines
Mavuso points out that the unions act as if we live in a world we have not seen for 15 years, when growth was running above 5% and government boasted a budget surplus. Instead, she says, we live in a world where:
- Goodyear Tyres just let more than 900 workers go after having to shut its 78-year-old plant in the Eastern Cape, affecting thousands more jobs down the value chain
- South African Breweries is engaging with unions regarding the potential retrenchment of workers across its operations.
- Mines across the country are retrenching thousands because they cannot get their output to the markets.
In many of these cases, Mavuso says, union action at Transnet is a direct contributor to this job carnage. “The failure here is twofold: unions’ refusal to accept performance-linked pay and management’s refusal to insist on it.
“If workers were to get increases linked to Transnet’s performance, we could support these. Bonuses could be tied to improvements in volumes shipped through ports and on rails, or specific metrics like international port efficiency rankings, which currently put South Africa’s ports among the worst in the world.”
Instead, she says, the unions demand guaranteed increases regardless of whether Transnet improves its service delivery.
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Toxic dynamic where unions treat state as ATM
Mavuso says this represents a toxic dynamic where unions treat the state as an endless ATM. “Private sector unions understand that companies must remain viable to protect jobs, but Transnet’s unions can make unreasonable demands, knowing that management cannot afford to have their suboptimal operations interrupted, as this will put a further strain on the economy.
“Worse still, they secured additional job security guarantees in this wage agreement, further limiting Transnet’s flexibility to restructure and improve performance. The unions know exactly what they are doing. They understand that by threatening strikes at Transnet, they can hold the entire economy hostage.
“They know that government will always cave in rather than face the economic disruption of a logistics shutdown. This is economic blackmail pure and simple, and taxpayers are footing the bill while the economy suffers.”
Mavuso says she has written extensively about the solutions needed for Transnet, including private sector investment and competition. However, as long as militant unions can veto any meaningful reform through strike threats, we will remain trapped in this cycle of poor performance and endless bailouts.
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Unions protect members in Transnet at expense of economic well-being of SA
“The unions made it clear they prefer protecting their members’ privileges over the economic well-being of the country. The wage settlement shows just how unhelpful these unions can become to South Africa’s economic prospects.
“We need government to finally take a firmer stance. Treasury must demand that any future bailouts come with strict conditions that break the unions’ stranglehold over Transnet’s operations. Treasury must insist on performance metrics as strict as those facing any private company seeking bailout funds, and the power to override union objections when restructuring is needed.”
Business wants to partner with Transnet, but Mavuso says the unions’ actions are not helpful, and they do not support the economic recovery everybody is trying to achieve. “Until government finds a way of confronting union militancy at state-owned enterprises, taxpayers will continue subsidising this destructive cycle while our economy stagnates.
“The unions must be called on to contribute to solutions of rebuilding our economy rather than exacerbating its challenges,” she says.
