By Khulile Thwala
As the Transnet strike in South Africa gains momentum, a shortage of basic commodities including fuel, raw materials for manufacturing and food is looming large. With the ongoing strike, Transnet has declared a force majeure at all its ports over the strike. This means all ports operated by Transnet are not operating, which has resulted in all SADC rail companies halting their businesses in the process, including Eswatini Railway.
Considering that Eswatini imports over 80 per cent of goods and services from South Africa, of which over 50 per cent come through rail, the country will face an acute shortage of different basic commodities that has been triggered by the supply chain disruption caused by the Transnet strike. Again, the country is not able to export its goods to the different global markets, and that will further result in the country losing revenue. Mostly, Eswatini transports minerals, timber, sugar, and ethanol by rail and currently, all these commodities are not able to leave the country to the markets.
Commentators say the severity of the implication of the SA strike will possibly hamper trade, worsen food insecurity and result in an insurmountable loss for the kingdom.
Earlier, Transnet has maintained that its terminals at ports have not come to a standstill, logistics businesses have warned of a catastrophic economic fallout if operations at the state-owned logistics giant’s ports in Durban and Cape Town face prolonged suspension following the declaration of a force majeure.
The strike follows a deadlock in talks over salary increases between labourers and Transnet after workers demanded a 12 – 13 per cent increase and rejected the most recent three per cent wage hike by the company. On Monday, South African unions including the South African Transport Workers Union (SATAWU) joined in on the strike.
According to an impeccable source at Eswatini Railways, there is currently no revenue being generated through the transit of cargo as the strike has resulted in cargo not coming in or out of the country. According to our sources, about 85 per cent of revenue generated by Eswatini Railways comes from cargo transported from Transnet.
He detailed that most goods such as raw materials used by manufacturers, timber, sugar, and ethanol were not being transported in or out through trains due to the Transnet impasse and this equated to purportedly no generation of revenue by the corporation.
The source indicated that the impact could appear low at face value but behind the scenes, it was far more than one could imagine.
“Trucks transport too little to solely rely on the revenue generated from their transporting of cargo. Since we are a small country, we fail to realise just how significant the impact will be,” he said.
It was also established that cargo potentially affected included cement, medicine or pharmaceuticals which require cold storage and purportedly food items.
The source went on to say that the strike could potentially hamper the generation of revenue even if it would stop tomorrow because the repercussions are far-reaching. The source further predicted a potential E1 million loss daily due to the strike.
The Minister of Commerce, Industry and Trade Manqoba Khumalo when reached for comment on the matter stated that this was hampering trade and would continue to do so.
“We hope Transnet and their employees will soon find common ground so that trade in the region can continue,” said the minister.
Eswatini Railways Corporate Communications Manager Sive Manana says the trains in transit are typically from the South African side and if those trains which generate revenue are stationary, this will directly affect the operations of the corporation.
“We are between SA and Mozambique, and business ought to come from either side. Therefore, other than the little generated locally, most revenue is collected from cargo from or heading to Mozambique or South Africa, with the bigger chunk of revenue being generated from SA. Hence, when there is a strike, we are affected because no trains come through,” he said.
Manana further said there was very little cargo going in and out currently, although not completely stationary. He said at the current stage, they could not ascertain the loss the corporation was making.
The corporate communications manager detailed that Eswatini Railway mostly transported bulk minerals coming from Phalaborwa to Richards Bay Port and other import and export containers coming from Durban to Matsapha. When questioned on whether the cargo included food items, he stated that Eswatini Railways does not move food items from SA and the only time was when sugar was being transported from Mlawula to Mozambique.
“The commodities we mainly transport with Transnet are bulk minerals and ethanol is not currently being transported by us. 90 per cent of the cargo transported by us is bulk minerals coming from SA going through Eswatini to the ports of Durban. Most revenue is generated from that,”
The bulk minerals include magnetite, and rock phosphate, among others.
Economist Thembinkosi Dube in his analysis said the Transnet strike would predominantly have an effect on trade in the country, leading to a possible shortage of commodities that come through rail.
“The norm is that businesses look for alternative transport methods which are trucks. These, unfortunately, turn out to be expensive as they carry items. Businesses are more likely to transfer the transport cost to the product on sale. This is likely to drive up the inflation for the country,” said Dube.
He said, however, it was worth noting that this depended on the duration of the strike.
For exports, he said they may fail to meet their contractual obligations which is a huge risk exposure on their businesses as they can lose their market share.
“Furthermore, they might have excess stock as it is now not delivered to the intended clients on time. It would be obvious that they would tend to road transportation which will likely be expensive. However, this is a good opportunity for road freight companies as they might see a surge in demand for their services. What remains unknown is their ability to meet the demand, which may also inflate the freight costs crowding out smallholder businesses,” said the economist.