As the rand tanks, SA business warns of dire economic consequences from Transnet strike
With the rand on the rocks, business is warning that the Transnet strike’s impact on South Africa’s economy will be severe. Indeed, it’s the last thing this economy needs in the face of rolling blackouts, slowing global growth, rising interest rates and a failing state that can hardly provide basic services.
A number of business associations on Thursday issued statements regarding the Transnet wage strike by members of the Satawu and Untu unions, and said the long-term consequences could be dire. Transnet Port Terminals last week issued a force majeure as a result of the industrial action, which began a week ago.
“Business is … concerned if this lasts more than a few days, cargo ships will not just skip slots at South African ports but start taking South African ports out of schedules in the months ahead,” Business Leadership South Africa and Business Unity South Africa said in a joint statement.
“This will add significant costs to either airfreight items or truck goods to and from other African ports — which will add to the inflation pressures South Africans are facing,” the statement said.
It’s a deeply distressing scenario — cargo ships giving South African ports a wide berth is not good for trade, to say the least. There is no real alternative to shipping for most products. It demonstrates the level of risk that doing business with South Africa has now reached in the eyes of the global economy, and risk aversion is all the rage these days.
Indeed, this is a key reason the rand is on the rocks again. The currency on Thursday hit 18.51/dollar, its lowest level against the greenback since May 2020 when the economy was collapsing under the weight of draconian lockdown measures.
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The dollar has been flexing its muscles against most other currencies as the US Federal Reserve increases rates with a hawk’s eye on inflation. But the rand may still have been better off were it not for the plethora of problems besetting the economy.
And the Transnet strike is having an impact with direct consequences for the rand as it is choking exports and the hard currency they bring to the economy, which is a crucial base of support for the currency.
“According to our estimates, bulk mineral exporters are losing R815-million worth of exports per day because they are unable to rail and load 357,000 tonnes of iron ore, coal, chrome, ferrochrome and manganese on to ships daily,” the Minerals Council SA, the mining sector’s main umbrella group, said in a statement.
“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. Major mineral export harbours are 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,” it said.
In a presentation last week to the Johannesburg Mining Indaba, Minerals Council South Africa CEO Roger Baxter said Transnet’s woes, even without the strike, had already cost South Africa R50-billion in 2022 in lost iron ore, coal, chrome, ferrochrome and manganese exports as measured by delivered tonnages against contracted rail tonnages. The loss last year, using the same metric, was R35-billion and this year’s losses are still growing.
A Transnet strike was the last thing South Africa’s economy needed in the face of rolling blackouts, slowing global growth, rising interest rates and a failing state that can hardly provide basic services. Even if it ends soon, the damage may be long-lasting. DM/BM