Conflict Ensues Between Transnet and Trade Unions over Salary Requests

Transnet and its largest trade unions are at odds over demands for wage hikes that significantly exceed inflation over a three-year period, as well as a halt to retrenchments.

The two principal unions – the SA Transport and Allied Workers Union (Satawu) and the United National Transport Union (Untu) – have dismissed Transnet’s initial offer of increases tied to CPI. Untu noted that management opposed CPI-linked increases in 2022 when inflation reached 7.8%, yet now favors it at a 3.2% inflation rate.

Read: Pivotal reform in Transnet’s final Network Statement

On Wednesday, Transnet announced a revised three-year proposal of CPI plus 1% (4.5%) for the first year, and CPI plus 0.5% (5% increase) in the second and third years. This increase encompasses salaries as well as related components such as the 13^th cheque, pension fund contributions, medical aid subsidies, and housing allowances.

However, this offer still falls short of the unions’ demands.

Untu is seeking a 12% increase for one year, a monthly housing allowance of R2,750, a medical aid allowance of R2,950, no overtime limits, and a freeze on retrenchments.

Meanwhile, Satawu is demanding a 17.5% increase over three years, a freeze on retrenchments, and enhanced medical aid subsidies, similar to Untu’s requests.

The trade unions have yet to respond to Transnet’s latest offer.

Transnet believes its proposal is fair and reasonable considering the current financial and operational difficulties, while also taking into account the cost of living, employee well-being, job security, and the organization’s long-term viability.

“Importantly, a three-year wage agreement offers a stable and predictable framework for all parties involved.”

Strategic priorities

The company states that discussions with the trade unions are ongoing, and a swift resolution of negotiations will allow it to concentrate on its strategic goals of enhancing operational and financial efficiency, thus ensuring job security for both current and future generations of South Africans.

Fixed labor costs represent approximately two-thirds of Transnet’s operating expenses, so an agreement close to union demands could jeopardize the recovery of the rail and port operator.

Transnet carries a debt of about R137 billion, half of which was incurred due to state capture, costing the company over R1 billion each month.

Read:

It may take R80bn and 10 years to fix Transnet’s core rail network [May 2024]

Untu and Transnet previously agreed to a three-year wage increase in 2022, which ranged from 5.5% to 6% for most employees, along with enhanced medical aid subsidies. That agreement is set to expire on 31 March 2025.

Satawu has indicated the possibility of strike action if an agreement is not reached, although it advocates for this to be a last resort.

Transnet’s workforce has decreased to around 50,000 from a high of 67,000 in 2015.

Transnet turnaround

Following a reported loss of R5.7 billion in 2023, the company aims to return to profitability by 2025 through debt reduction and enhanced operational performance.

Positive signs of recovery in rail volumes are emerging, which had plummeted to levels not seen since the post-World War II era.

Read:

Transnet’s rail monopoly is coming to an end [Dec 2024]
South Africa approves blueprint to open up rail-network usage [Dec 2024]

Rail volumes seem to have stabilized at around 152 million tonnes (Mt) in 2024, approaching the target of 154Mt.

Rail accounts for 43% of the group’s revenue, but volumes have declined by one-third since 2018.

The company has requested a R100 billion bailout from the National Treasury and received a R47 billion guarantee facility in 2023 to assist with immediate debt obligations.

According to DA finance spokesperson Mark Burke, the company has already expended over half of these funds and will soon require additional support.

Listen/read: Durban to get lion’s share of R3.4bn Transnet port equipment overhaul

Additionally, it seeks for the government to assume R61 billion of its debt, although this is becoming increasingly difficult given the challenges of budget balancing amid various competing priorities.

Finance Minister Enoch Godongwana was anticipated to announce the type of assistance that would be provided to Transnet during the 2025 Budget speech; however, this speech was canceled last month after the DA withdrew support for a two percentage point VAT increase.

Read:

[South Africa’s] Budget speech cancelled

No budget certainty, but Sars’s tax collection conviction remains

SA’s cabinet has given Godongwana options for budget

Burke suggests that a comprehensive analysis of assets, process flows, and portfolios is essential to better understand how to restructure the organization. Future funding for Transnet will likely need to come from the private sector.

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