South Africa’s economy may lose “billions of rand” if a strike that has shut ports and rail lines and slashed exports of metals, wine and fruit to Europe and Asia, isn’t resolved soon.
“Hundreds of millions of rand are being lost every day as a result of the strike,” said Johan Botha, an economist at Johannesburg-based Standard Bank Group Ltd., Africa’s largest lender, in an interview today. “If it lasts for a week or so, then we can talk in terms of billions.”
A strike by more than half of the 54,000 workers employed by state ports and freight rail operator, Transnet Ltd., today entered its fourth day. South Africa is the largest supplier of coal to European power plants and the world’s biggest ferrochrome producer. Transnet operates the nation’s main metal and grain lines, as well as a pipeline that is Johannesburg’s chief source of fuel.
Ferrochrome producers Xstrata Plc, Samancor Ltd. and Ruukki Group have declared force majeure on shipments of the steel-making ingredient, while Anglo American Plc’s Kumba Iron Ore Ltd. has been “quite severely” affected. Force majeure means companies are unable to meet contract terms because of circumstances beyond their control.
Two terminals at the Transnet-operated port of Richards Bay, South Africa’s biggest bulk export facility, are running at about 20 percent of capacity, according to two shipping agents, who declined to be identified because Transnet hasn’t disclosed the strike’s full impact.
Richards Bay port handles commodities including metals, ferrochrome, granite, paper pulp, wood chips and phosphoric acid.
Ports at Durban and Cape Town are facing a “build up” of vessels and Transnet is having “great difficulty” handling containers, Pradeep Maharaj, Transnet’s chief executive of human resources, said. About 59 percent of the company’s workforce is on strike, he said. Durban is the main port for the country’s economic heartland of Gauteng, which includes Johannesburg.
Loading of citrus fruit has stopped completely, Maharaj said. South Africa is the world’s second-largest citrus producer after Spain, according to Justin Chadwick, chief executive officer of the nation’s Citrus Growers Association.
The industry, worth an annual 4.5 billion-rand ($600 million), is currently storing fruit in fridges. The stores will be full within two days and “we’ll be in trouble,” he said from Durban. About 55 percent of South Africa’s citrus produce goes to Europe and 20 percent to the Middle East.
Four Weeks of Coal
Wine shipments have also been halted, said James Reid, vice chairman of Wines of South Africa, which represents 500 wine exporters. “If we can’t export it, we lose the business,” he said from Stellenbosch, in South Africa’s wine belt near Cape Town.
Stocks at the terminal are expected to last another four weeks, said Xavier Prevost, a coal analyst at XMP Consulting, by phone from Johannesburg today. “If the strike continues beyond that, there may be a problem. Coal exports will be delayed.”
The strike is undermining efforts to revive Africa’s largest economy after its first recession in 17 years. The government is also worried about the effect on the country as it prepares to host Africa’s first soccer World Cup, due to kick off on June 11.
Soccer World Cup
Transnet is prioritizing containers that contain products related to the World Cup, Maharaj said today.
The strike may intensify next week with unions pledging to halt commuter rail services used by about 2 million passengers a day.
The Commission for Conciliation, Mediation and Arbitration, which resolves labor disputes, mediated talks between Transnet and union representatives today and more talks will take place tomorrow, said the United Transport & Allied Trade Union Deputy General Secretary, Eddie de Klerk.
“We will work through the weekend to see what we can achieve,” Utatu General Secretary Chris de Vos said in an interview. “The longer it takes the higher the blood pressure. It’s in everyone’s interest that this is resolved.”
The unions want a 15 percent wage increase and improved benefits, while Transnet is offering 11 percent and the Passenger Rail Agency 5 percent. South Africa’s annual inflation rate was 5.1 percent in March.
“Fifteen percent is completely out of reach, given that the economy in only now starting to pick up,” said Standard Bank’s Botha. “It then sets a target for other trade unions.”
“We can’t return to work until our grievances have been resolved,” said striking dock worker Blessing Mwenye in an interview in Durban. “This is about more than just money, it’s about the different conditions between workers and management.”