Transnet group CEO Portia Derby says the rail and ports utility will have to reprioritise its operating budget to allow for the extra increases they awarded to striking workers a few weeks ago.
After a two weeklong strike by employees in October, during which Transnet was forced to declare force majeure, the company finally agreed to offer its employees a 6% increase in year one, a 5.5% increase in year two and a 6% increase in year three plus increases to medical and housing allowances, to entice them back to work.
The new wage deal is expected to have the net effect of increasing its already huge wage bill which accounted for 66% of operating costs before the strike.
The R5.8bn allocated to Transnet in October’s medium-term budget policy statement will not go to cover these additional salary costs but to pay for the repair of infrastructure damaged by the April floods in KwaZulu-Natal and the Eastern Cape, and to maintain freight rail locomotives.
The funds are also expected to increase locomotive capacity, the shortage of which has been flagged by Transnet’s customers for their inability to export desired volumes.
“A big project that we have going forward is to rebase the costs right across the system and move towards genuine cost recovery on rail and ports,” Derby told Business Day.
“The big drive right now is to find a way to reduce costs and increase revenue on the other side, which we are prioritising.”
Transnet is also looking at accepting offers from some of its customers to pay increased terminal handling fees to fill the gap left between Transnet’s offer and what the unions are demanding, she said.
“We were able to look at our long-term contracts to see if there are opportunities to pass through some of these increases,” she said.
The industrial action cost mineral exporters R815m in lost revenue as bulk mineral exporters were unable to load goods onto rail to the ports, according to the Minerals Council.
Mining firms have lost about R50bn in pre-strike revenue because of infrastructure inefficiencies that resulted in mineral exporters being unable to take advantage of the 2021 commodity price boom.
For its part, Transnet is still counting the cost of the strike on its overall revenue, said Derby.
“We wouldn’t be counting the losses of customers but are looking at our losses incurred on the revenue side.
“As the strike was happening the fight was not so much against the company but really dealing with the material conditions on the ground ... the wages of the middle class have been declining and if we don’t deal with that broadly we are going be reducing even more the small consumption base in SA,” she said.
Transnet lifted the force majeure — a clause in contracts that excuses an entity from fulfilling its obligations in the event of a natural or unavoidable catastrophe — on Monday, saying its container handling operations are ready to return to pre-strike levels of activity.
“In Durban we are moving hard and fast because 60% of the commodities in SA move through the port. Unfortunately we have not moved the commodities that we were supposed to move and we are going to have to catch up within this financial year,” said Derby.
maekot@businesslive.co.za
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