South Africa’s already-tarnished reputation for logistics risked long-term damage if the Transnet strike dragged on, the Minerals Council South Africa, Business Unity South Africa and Business Leadership South Africa warned yesterday as they called for a speedy resolution.
This follows Transnet Port Terminals, an operating division of Transnet, declaring a force majeure to its customers due to a wage dispute, which is deadlocked. Workers yesterday rejected Transnet's revised pay offer.
Business Unity South Africa (Busa) and Business Leadership South Africa said business was concerned if the strike lasted more than a few days, cargo ships would not just skip slots at South African ports, but start taking South African ports out of schedules in the months ahead.
Cas Coovadia, CEO of Busa, said: “We need a quick, sustainable resolution to this strike, not ad hoc solutions. The strike risks severe damage to the economy not just in the short term, but also the longer term if it drags on and South Africa’s reputation for logistics gets further tarnished.”
The evidence of this was evident after yesterday Grindrod said its Port and Terminals division, at the Maputo Port volumes were up 23% compared with the nine-month period a year before, capitalising on additional slab and berthing capacity.
“The port provides the shortest route to sea from the Gauteng industrial hub and from Limpopo and Mpumalanga mining areas and has seen volume growth in recent years due to inefficiencies and delays at the Durban port, such as for example, the resumption this year of citrus exports through Maputo,” it said.
The Minerals Council, whose members account for more than 80% of Transnet’s rail business and 50% of the group’s income, also said the strike was damaging exports and imports, threatening not only mining companies, but the country’s fragile economy at a time when 44% of people were unemployed.
According to its estimates, bulk mineral exporters were losing R815 million worth of exports per day because they were unable to rail and load 357000 tonnes of iron ore, coal, chrome, ferrochrome, and manganese onto ships daily.
“On average, South Africa exports about 476 000 tonnes of bulk minerals a day worth R1.06 billion. We estimate that just 120 000 tonnes of minerals worth R261 million are being exported daily,” the Council said.
Major mineral export harbours were operating at between 12% and 30% of their daily averages.
“The damage caused by the strike is not just the immediate impact, but the longer-term consequences of having to catch up on delayed exports and imports, which will have a ripple effect on business and broader society. The long-term reputational damage to South Africa as a reliable supplier to global markets must be considered by all parties,” the Council.
The Council said it was deeply concerned that the labour action at Transnet would compound the losses its bulk mineral exporting members were already experiencing because of Transnet struggling to meet targeted annual tonnages on its rail network and throughput at ports.
“The Minerals Council estimates an export loss of R50 billion on an annualised basis this year for iron ore, coal, chrome, ferrochrome, and manganese exporters as measured by delivered tonnages against contracted rail tonnages. This compares to a loss of R35 billion in 2021 based on the same metric,” it said.
In contrast, it said, R151bn could be gained in additional exports, with the concomitant benefits of employment in mining increasing by 40 000 jobs to 500 000, the fiscus benefiting from improved tax revenue and higher revenues for Transnet if all rail and ports systems were optimally and efficiently run at design capacity.
Last week, some mining companies said they were hurt by the Transnet strike.
Anchor Capital investment analyst Seleho Tsatsi said Kumba announced that the force majeure would reduce export sales by 120 000 tonnes per day during the strike, which equates to about a 2% reduction in export sales for every week that the strike goes on. That’s quite a material number because these businesses have large fixed costs.“
He said Thungela also put out communications with the market about the situation. Exxaro was also affected via its export thermal coal business and its stake in Sishen Iron Ore Company. Anglo American is also affected via its stake in Kumba.
Afrimat also said yesterday the Transnet force majeure had an impact on both the export and inland logistics for the iron ore mines.
Meanwhile, Casey Delport, an investment analyst at Anchor Capital, said the strike posed a significant risk to South Africa’s agricultural sector, which was highly export driven.
“In the export agricultural commodity business, especially that of high-value products, the reliability of South African suppliers is key in a highly globalised competitive world. Therefore, any potential prolonged delays would negatively impact the business activities of the South African suppliers to various markets in the world,” Delport said.
BUSINESS REPORT