Transnet and the United National Transport Union (Untu) have reached a pay rise agreement — a move that might pave the way for the nearly two-week-long strike at the state-owned port and rail operator to end. 

Transnet announced on Monday 17 October that it has signed a pay rise agreement spanning three years with Untu, which is a large trade union representing 24,992 workers at the company. 

Untu represents about 53,9% of Transnet’s workforce that downed tools since 6 October over a pay rise dispute. The strike, joined by a majority of Transnet’s 55,000 workers (except those who are employed in marine operations and port security), has crippled the company’s operations and productivity in South Africa’s economy. 

The agreement, reached with Untu at the Commission for Conciliation, Mediation and Arbitration, affords Transnet workers pay increases of 6% in 2022 (backdated to 1 April), 5.5% in 2023, then 6% in 2024. This is an across-the-board offer — regardless of employment levels or years of experience that Transnet workers have. 

It is a big U-turn and compromise by Untu, which dug in its heels and pushed for wage increases that are linked to consumer inflation (measuring at 7.6% in August) or surpassing the rate. Untu was not immediately available to comment on the pay rise agreement. 

Untu’s acceptance of Transnet’s pay rise offer doesn’t necessarily mean that the strike is over. Transnet’s offer has been rejected by the South African Transport and Allied Workers Union (Satawu), another large trade union at the port and rail operator.

Satawu deputy general secretary Anele Kiet told Business Maverick that its union leadership met on Monday evening “to reflect on the development that transpired between Transnet and Untu”. And it was
resolved that Satawu should reject Transnet’s three-year offer because the
trade union is still forging ahead with its demand for an inflation-linked
pay rise.

Satawu has also trashed Transnet and Untu over their pay rise deal in a
statement. “The decision [to reach a deal] in question not only
disadvantages but correspondingly undermines the interests of the
working-class, low-earning employees, in particular. This demonstrates
that the working class is not homogeneous but is divided from a
stratification, theoretical, conscious, social and economic point of view,”
Satawu said.

Transnet said Untu’s acceptance of its pay rise offer has the effect of ending the industrial action by the trade union “with immediate effect”. Transnet said it would now shift its attention towards clearing shipping backlogs that occurred across the port and rail system during the industrial action.

Transnet is responsible for ferrying most of the iron ore, coal, chrome, ferrochrome, and manganese that South Africa exports to countries around the world — exports that depend on Transnet’s efficiency. The mining sector depends on Transnet’s rail and port network to transport their goods to market. But the 12-day-long strike has resulted in Transnet’s ports and rail network operating with skeleton crews, throttling the company’s productivity and that of the mining sector. The mining sector alone said it has lost R9.7-billion (or R815-million a day) in lost export opportunities since the strike started. 

Problems ahead for Transnet

To convince workers affiliated with Untu to end their strike, Transnet also offered an increase in the medical aid subsidy, which is equivalent to the percentage increases in wages (between 5.5% and 6%). The increase in the medical aid subsidy for the 2022/23 financial year will be implemented from 1 October 2022, Transnet said. The company also plans to increase the housing allowance from 2023 and 2024. 

Transnet’s offer arguably has many holes in it. Some market watchers estimate that if Transnet offered its workers a pay rise closer to inflation (such as the 6% offered and accepted), it would add between R700-million and R1-billion to its total cost of remunerating its workers. It costs R26.2-billion to pay its 55,000 workers (comprising those employed permanently or on fixed-term contracts). The remuneration bill makes up nearly 60% of Transnet’s total annual expenditure of R45-billion, which is unsustainable because the company often reports financial losses rather than profits. It is unclear how Transnet will fund its ballooning remuneration cost. 

Insiders close to the pay rise negotiations told Business Maverick that Transnet is weighing three ways to fund the additional pay rise cost; increase its borrowings from capital markets, increase the annual port and rail fees it charges customers to generate additional revenue, or ask the government for financial support. 

The agreement between Untu and Transnet also doesn’t mention anything about the company being prevented from embarking on retrenchments after the agreement is implemented. Speculation inside Transnet is rife that the company might go through another round of retrenchments by offering voluntary severance packages once the labour dispute is settled. It embarked on a similar process in 2021. DM/BM