South Africa’s agricultural sector could suffer dire long-term consequences if the Transnet strike is dragged out too long. Wandile Sihlobo, one of the country’s foremost agricultural economist, has sounded this warning as continuing strike action could not only cause immediate disruptions but also damage to South Africa’s standing with markets elsewhere.
The strike had Transnet declare a force majeure at its port operations last week and there is a risk that disruptions could escalate this week.
The South African Transport and Allied Workers Union (Satawu) and the United National Transport Union (Untu) told news outlets over the weekend that workers are demanding a wage increase of a minimum of 10%, slightly down from the initial demand of 13.5% but still far from Transnet’s offer of 4%.
Sihlobo, chief agricultural economist at Agbiz, warns that the severity of consequences will depend on how long disruptions to the flow of goods to and from other countries will last.
He says historical numbers don’t necessarily indicate the total loss that the strike would cause, but the importance of South Africa’s ports to the country’s food security and trade. What’s more, is that an expanding agricultural sector will need the expansion of exports.
Exports of food, fibre, and beverages in the fourth quarter of 2021 amounted to 2.8 billion US dollar – 23% of the total value of exports in that year. This included citrus, maize, apples and pears, wine, grapes, nuts and berries, wool, soybean oil, apricots, cherries, and peaches.
“Not all these exports were facilitated through Transnet. Still, the point is that the fourth quarter of each year is a high export activity quarter. Given that agricultural production has generally been resilient, we expect that there are substantial volumes of exports of various products scheduled for this month.”
Similarly, South Africa imported products like wheat, palm oil, rice, spirits, poultry meat, sunflower oil, and soybean oilcake, amongst others, in the same quarter last year and these amounted to 1.9 billion US dollar.
“Any costs would ultimately depend on the scale and timeframe of disruptions. The focus should be on supporting both parties to find common ground. Indeed, the whole logistics industry is the bloodline of South Africa’s export-oriented agriculture sector.”
In the export business, especially of high-value products, the reliability of South African suppliers is key in a highly globalised competitive world, says Sihlobo. Therefore, any potential prolonged delays would negatively impact the business activities of the South African suppliers to various markets in the world.
“Different agricultural groupings and commodity associations have already been vocal in the weekend newspapers about the possible negative impact of the Transnet strike on their businesses and the agricultural economy,” he says.
Important to improve, not only maintain
“Aside from the immediate strike concerns, the logistics industry requires improvements, from roads and rail to ports, to support a growing agricultural sector. Road networks have deteriorated severely across South Africa over the recent past, weighing on agribusinesses and farming entities,” Sihlobo says.
Already, he adds, some are using the capital resources which could have been allocated to business expansion, and thus long-term employment, to maintain and build roads.
Similarly, there are long-standing challenges with rail and ports. “Fortunately, on this part, Transnet has been working closely with agribusinesses, commodity associations and farmer groupings to refine their agricultural strategy that responds to the sector’s needs and devise a long-term solution.”
Sihlobo believes this is crucial as South Africa already exports half of its agricultural produce. Any improvements in production going forward will have to be linked to potential export markets, and the logistics industry will be at the heart of this process.
“The current labour disputes at Transnet are an important risk for South Africa’s food, fibre and beverages sector,” he says. “Stoppages would negatively affect both imports and export activities. The actual costs of it, however, will depend on the duration of the strike.
“We hope a solution is found quickly between Transnet and the labour unions to minimize disruptions to trade.”
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