A widespread strike at state-owned transport and logistics group Transnet is expected to hit export and import operations as port delays are affecting the entire supply chain. The strike, lead by the South African Transport and Allied Workers' Union along with the United Transport and Allied Trade Union, comes after demands for a 15% salary increase and various working conditions were rejected. Transnet management is offering an 11% wage increase. The strike is affecting the container sector and causing port and rail transport delays. Concerns centre on disruptions to the export of perishables such as fruit and also main foreign currency earners including ferrochrome, iron ore, and coal. Disruptions to fuel supplies that need to be moved from coastal ports to main inland industrial areas could also arise.
Significance: Not only can South Africa not afford disruptions to its export sector during the economy's fragile recovery, but the double-digit wage demands during a time of single-digit inflation would also impede the country's competitiveness further. Trade unions and business have bemoaned the relatively strong currency, which constrains the manufacturing sector's ability to compete internationally, but fail to address crucial labour-market rigidities adding to higher input costs and keeping unemployment at unacceptable high levels. Transnet's 11% wage increase offer is more than double the prevailing inflation rate of around 5%, which implies the increase would directly result in more inflationary pressures and also raise the overall benchmark for wage settlements. A struggling export sector, because of high input costs and infrastructural problems, had in the previous upswing added to a significant current-account deficit, which in turn necessitated cooling-down economic measures. Given South Africa's pertinent balance-of-payments constraint, the export sector is highly vulnerable to disruptions but cannot afford the negative impact of such labour action.
