Transnet: a tale of woeful ways

The Transnet strike is but one of many reasons to shake one’s head in despair at the woeful condition of this state-owned enterprise, writes NICK PORÉE.

Winston Churchill said of political inaction: “Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes until self-preservation strikes its jarring gong – these are the features which constitute the endless repetition of history.”

The recent Transnet strike brings home the reality of this comment. The sighs of relief may be short-lived when we count the damage and destruction done to society, business, international relations, and future terms of trade. The estimated R500 million per day that the strike was costing the country mirrors the situation at the borders, where R400 to R600 million per week is wasted on transport delays and probably three times that amount on costs of production in neighbouring countries.

Decrepit monolith unable to control its staff

Resolution of the strike merely places Transnet back into the position of a decrepit monolith unable to control its staff, or provide the services required by its customers. The negotiated settlement means that the organisation will continue to bleed money and require increasing subsidies from the fiscus. The increased cost will exacerbate the decline in tonnage hauled and inevitably increase the rates required to recover the additional costs.

The analysis of the Transnet accounts by the African Rail Industry Association (ARIA) showed that staff numbers have declined, but wage costs have increased exponentially over the past ten years. Transnet has granted increases above the Consumer Price Index (CPI) across the board of 28.7% or R3.9 billion over the past 10 years. This is not commercially sustainable, and it is important that employees realise that they are contributing to the demise of the company, instead of supporting an expanding railway industry.

The impacts of the continuing monopoly throttle on the logistics systems of the country are being felt by agriculture and mining, with farmers throwing away citrus which cannot be profitably transported to markets, or simply going out of production. Mines are seeking long-haul trucking capacity of 100 trucks or more for the 1 200 km run from Hotazel to Durban to move manganese for export. The R37 000 rates offered for the 72-hour round trip are far too low but no doubt some new entrants to the business will get burnt.

Decisive action needed

It was Churchill who also said: “Never let a good crisis go to waste.” He would no doubt have recommended decisive action to reposition the Transnet operations to become commercially viable rather than just restoring the status quo. Somewhere along the line, it will be necessary to restructure railways and ports into competitive entities which can meet the standards required by international logistics operators.

The failure to maintain, improve, modernise, and expand the Transnet operations is a huge drag on South Africa’s global competitiveness, losing billions of dollars in sales and market share. The badly skewed labour market is a major factor in the global uncompetitiveness of the country leading to disinvestment and increasing unemployment.

There is a real danger that the country will experience a growing exodus of people, as is the case in Venezuela, where six million people have emigrated following failed economic policy. The increasing attraction of stable employment and better pay is likely to motivate technicians and managerial-level employees to emigrate, with disastrous impacts on South Africa’s very limited skills base.

Business and government need to work together

There is a need for improved dialogue between business and government regarding the future of transport and logistics. The obsolescence and inefficiency of railway and port equipment and the destruction of infrastructure require urgent investment beyond the capacity of government funding. The private sector has the expertise, capacity, and resources to rectify the situation but is blocked by the unrealistic current political aspirations and vested interests.

If the current attrition of performance is allowed to persist there is no alternative for industry but to develop parallel systems, as has been done in many other areas of government failure such as education, health, and security. South African logistics companies are busy in Maputo, Beira, Nacala, and Walvis Bay and will be assisting with ways to work around South Africa.

The road freight industry is very badly regulated, and the standards of operation are contributing to daily disasters on the roads. The situation will be aggravated by the mass of incompetent new operators vying for loads shed by railways, and cut-throat competition with disregard for operating safety, maintenance, and driver control. With about 60% of trucks on the road being unroadworthy, the lame announcements and threats by the Minister of Transport and his agencies do nothing to resolve the problems and deficiencies in the current systems.

South Africa needs to break the mould and create a modern, competitive, open-access railway industry; upgrade the ports with commercial terminal operators; and revise, upgrade, and modernise the management of road freight standards as envisaged in the Road Transport Quality System (RTQS) in the 1980s and repeated in the Road Freight Strategy approved by Cabinet in 2017. As reported by the Organisation Undoing Tax Abuse (OUTA), the inertia and ineffectiveness of parliament is part of the problem. These actions would attract investment and pave the way for effective participation in the African Continental Free Trade Area (AfCFTA).