• While private companies retrench workers and slash costs to survive, Transnet has capitulated to union strike threats and awarded 6% annual pay rises for the next three years to its workers, double the inflation rate.
• Transnet has just received more government guarantees, meaning taxpayers are directly subsidising excessive pay increases at a utility that costs the economy R1 billion daily through poor performance.
• Unions are threatening the economy while refusing to tie pay to the performance of the utility. If Transnet’s workers were to get increases that were indexed to improved rail and port performance, we would support it.
• Part of the wage agreement includes additional job security guarantees, so Transnet is limiting its flexibility to accommodate future restructuring.

I was astounded to see news last week of Transnet’s capitulation to union strike threats, agreeing to give workers 6% pay rises in each of the next three years. This agreement represents a failure of leadership on both sides – militant unions holding the country hostage with strike threats, and management caving to their demands without a fight.

While South African businesses slash costs and workers face retrenchments, Transnet workers will get pay rises that are double the inflation rate, funded by taxpayers already struggling to make ends meet. Inflation is running at 2.7% and the economy is expected to only grow 1.4% this year. The news came days after National Treasury had agreed to give Transnet additional guarantees to enable it to manage its huge debt pile.

In the private sector, the bleak economic outlook is leading to severe belt-tightening. Managers everywhere are having to find ways to save and try to hoard cash to be able to trade through 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 has estimated that Transnet costs the economy R1bn every day thanks 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 GDP.

The unions are acting as if we live in a world we haven’t seen for 15 years, when growth was running at over 5% and government boasted a budget surplus. Instead, we live in a world where Goodyear Tyres has just let go of over 900 workers after having to shut its 78-year-old plant in the Eastern Cape, affecting thousands more jobs down the value chain. Where SAB is engaging with unions about retrenching workers across its operations. Where mines across the country are retrenching thousands because they cannot get their output to the markets. In many of these cases, 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 indexed 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 SA’s ports among the worst in the world.. Instead, the unions demanded guaranteed increases regardless of whether Transnet improves its service delivery.

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’ve 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’re doing. They understand that by threatening strikes at Transnet, they can hold the entire economy hostage. They know that government will always cave 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.

I’ve written many times about the solutions we need for Transnet, including private sector investment and competition. But as long as militant unions can veto any meaningful reform through strike threats, we’ll remain trapped in this cycle of poor performance and endless bailouts. The unions have 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. National 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 the unions’ actions are not helpful, and they do not support the economic recovery we’re all 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 need to be called upon to contribute to solutions of rebuilding our economy rather than exacerbating its challenges..

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BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. BLSA is committed to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.