WANDILE SIHLOBO: Why labour-related risks at Transnet matter for SA agricultural and food trade

A major challenge that emerged this past week that directly affects SA's agriculture is labour-related tensions at Transnet. The logistics utility has declared force majeure at its port operations, citing an illegal strike.

There is a risk disruptions could escalate this week. The weekend papers quoted statements by representatives of the SA Transport and Allied Workers Union (Satawu) and the United National Transport Union (Untu) that workers are demanding a wage increase of at least 10%, slightly down from the initial demand of 13.5%.

However, this is still far from Transnet’s current offer of 4%. Against this, Satawu said at the weekend that it had served Transnet with a 48-hour notice to strike from Monday October 10. Disruptions to the flow of goods to and from other countries could have a negative effect on SA’s food, fibre and beverages sector, depending on its duration.

While agricultural production tends to be seasonal, SA has diverse agriculture, and there is significant trade activity each quarter of the year. For example, exports of food, fibre and beverages in the fourth quarter of 2021 amounted to $2.8bn, 23% of the total value of exports in that year.

The products that dominated export activity were citrus, maize, apples and pears, wine, grapes, nuts and berries, wool, soybean oil, apricots, cherries and peaches. Not all of 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 there are substantial volumes of exports of various products scheduled for this month.

Similarly, SA imports a range of food products in the fourth quarter of the year. For example, in 2021 during this period there were imports of wheat, palm oil, rice, spirits, poultry meat, sunflower oil, and soybeans oilcake, among others.

Total imports of food, fibre and beverages in the last quarter of 2021 amounted to $1.9bn. In the same way as with exports, labour-related disruptions would cause havoc with import activity.

Importantly, I am not outlining these trade values to signal that this will be the direct loss if there is a strike. Rather, I am highlighting the importance of trade in SA’s food, fibre and beverages sector.

Any costs would ultimately depend on the scale and time frame of disruptions. The focus should be on supporting both parties to find common ground. The logistics industry as a whole is the bloodline of SA’s export-orientated agriculture or food, fibre and beverages sector.

In the export business, especially of high-value products, the reliability of SA suppliers is key in a highly globalised, competitive world. Therefore, any potential prolonged delays would have a negative effect on the business activities of SA suppliers to various markets in the world.

Agricultural groupings and commodity associations were vocal in the weekend newspapers about the possible negative fallout of the Transnet strike on their businesses and the agricultural economy.

Aside from the immediate strike concerns, the logistics industry requires roads, railways and ports to be upgraded to support a growing agricultural sector. The road network in particular has deteriorated severely across SA in the recent past, weighing on agribusinesses and farming entities.

Some are having to use capital resources that could have been allocated to business expansion, and thus long-term employment, to maintain and build roads. This is a public sector function and shouldn’t be covered by private businesses. Similarly, there are long-standing challenges with SA rail and ports.

Fortunately, Transnet has been working closely with agribusinesses, commodity associations and farmer groupings to refine an agricultural strategy that responds to the sector’s needs and to devise long-term solutions.

This is crucial as SA 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.

In sum, the current labour disputes at Transnet are a key risk for SA’s food, fibre and beverages sector. Stoppages would negatively affect both import and export activities, though the actual cost will depend on the duration of the strike.

• Sihlobo is chief economist at the Agricultural Business Chamber of SA and author of “Finding Common Ground: Land, Equity, and Agriculture”.