State-owned company costing South Africa R1 billion per day gets another lifeline

Business Leadership South Africa (BLSA) CEO Busisiwe Mavuso has criticised the wage increase at Transnet, as many other businesses have had to cut staff. 

Last week, Transnet overpaid a union strike after agreeing to pay rises of 6% for the next three years, double the current inflation rate and above estimates for the coming years.

Mavuso said that the agreement shows a failure of leadership from both militant unions holding the country hostage with strike threats, and management for caving to their demands with no resistance.

“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,” said Mavuso.

The settlement came only days after National Treasury agreed to give Transnet additional guarantees to enable it to manage its huge debt pile.

With growth expected to only increase by at best 1.5% in 2025 off an already low base, the private sector has had to tighten its belt.

Managers constantly look for ways to save and hoard cash to help them through harsh economic conditions.

However, not all firms will be able to survive the challenging times, with many workers losing their jobs.

“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,” said Mavuso.

She added that this is especially annoying considering that Transnet is one of the key reasons South Africa is in this poor economic predicament.

Transnet’s poor performance has been estimated to cost the economy R1 billion every day, thanks to its poor performance in moving goods via rail and ports.

This is equivalent to wiping out a midsize municipality’s daily budget, worth around 5% of GDP.

A time of retrenchments

Mavuso said that South African unions are living in a world that has not existed for 15 years, in which growth was over 5% and the government had major budget surpluses.

However, South Africa now lives in a world where Goodyear Tyres had to retrench 900 workers after shutting down its 78-year-old plant in the Eastern Cape.

South Africa’s mining industry has also seen massive retrenchments over the last two years, with Sibanye Stillwater, Anglo American Platinum and Impala Platinum cutting thousands of jobs.

Mavuso said that many mining retrenchments can be linked to companies not getting their product to the relevant markets.

In many cases, union action at Transnet directly contributes to the job carnage, as its poor logistics have stopped companies from exporting.

Mavuso said that management should also be blamed for refusing to insist on performance-linked pay. She argued that pay could be linked to improvements in shipping volumes.

“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.”

The additional job security guarantees in the wage agreement also further limit Transnet’s flexibility to restructure and improve performance.

The BLSA CEO stated that Transnet needs private sector investment and competition. Still, as long as militant unions can veto meaningful reform, South Africa will be stuck in a cycle of bailouts and poor performance.

“National Treasury must demand that any future bailouts come with strict conditions that break the unions’ stranglehold over Transnet’s operations,” she said.

“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.”