The impact of the worldwide recession on freight rail in South Africa and SATAWU’s response

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South African Transport and Allied Workers’ Union (SATAWU)

Freight rail infrastructure and operations in South Africa are owned by Transnet Freight Rail. The state-owned company is serviced from an engineering point of view by Transnet Rail Engineering, which builds and maintains wagons and locomotives. The two rail companies are part of the bigger state-owned transport group Transnet, which also owns and operates ports and pipelines. The Transnet Group employs 48,000 workers in the bargaining unit (non-managerial employees), of whom 38,500 in its rail related divisions: 25,000 are employed by Transnet Freight Rail, and 13,500 by Transnet Rail Engineering.

Passenger rail operations (long distance and commuter) are owned and operated by a separate state-owned company PRASA (Passenger Rail of South Africa). Any impact of the recession on passenger numbers has been mitigated by investments in additional commuter coaches and by attracting passengers from other more expensive modes of public transport. This article therefore focuses exclusively on the impact of the recession on freight rail.

Union organisation in the Transnet Group

Current overall union density in the Transnet Group is 75 per cent. SATAWU organises workers in all transport sectors, and has a total membership of 18,347 in the Transnet Group, 13,428 of whom are employed in the two rail divisions. UTATU (United Transport Trade Union) is another recognized trade union in the Group, with a membership of 18,131. UTATU has a co-operation agreement with a third unrecognized union, SARWHU (South African Railway and Harbour Workers Union), which has a membership of 4,778. The UTATU/SARWHU alliance works co-operatively with SATAWU on most industrial issues.

The Transnet Group has an executive structure which is representative of the senior managers of all divisions. The Group has a Board and a relatively small corporate head office staff, comprising mostly senior managers who play a co-ordinating and strategic planning role across the divisions. Day to day operating decisions are taken at divisional level.

Collective bargaining and consultations with SATAWU and UTATU also take place at the two levels, depending on the issue. A negotiated detailed Recognition Agreement spells out the agreed structures and procedures for negotiation and consultation, as well as the rights of shop stewards. In terms of the Recognition Agreement, 17 shop stewards are released by the company on a full time basis to deal with union issues in the Group. Wages are negotiated centrally on an annual basis.

Sharp decline in rail volumes since September 2008

Volumes and revenues within Transnet Freight Rail were on target until half way through the 2008/09 financial year (which runs from 1 April to 31 March). Volumes have been dropping dramatically since late 2008, although the country only officially entered into a recession in the second quarter of 2009. The downturn in volumes for the 2008/09 financial year (ending 31 March 2009) and the adjusted volume expectations for the year 2009/10 vs forecast (based on half year figures) are shown below.

While the figures show a stable picture for iron ore, the continued low demand for coal is having a significant impact on revenue. And general freight volumes remain substantially below the volumes carried prior to the recession. The year on year reduction in general freight volumes from February 2008 to February 2009 was 27 per cent. The products where volumes have decreased include manganese, chrome, domestic iron ore, dolomite, fuel, beer, automotives, containers, domestic coal and grain.

The decline in volumes is also reflected in cross border traffic. In January 2009 alone, volumes to Zimbabwe and the Democratic Republic of Congo (DRC) were under target by 27 per cent and 60 per cent respectively. Volumes from Zimbabwe and DRC were under target by 15 per cent and a whopping 100 per cent (down to zero).

Transnet-wide responses to the downturn

Investment plans

Prior to the downturn in volumes, the Transnet Group developed a R100 billion (US$12 billion) five year investment plan, starting in the 2007/08 financial year. However, the global meltdown has made borrowing both more difficult and more expensive, resulting in the Group restraining the investment plans to R80 billion and moving much of the expenditure (but by no means all of it) to years four and five, by which time the Group is hoping that the recession will have ended.

Transnet’s priority projects are the deepening of Durban harbour, upgrading the container terminal in the port of Cape Town, building a new pipeline from Durban to Johannesburg, expanding the capacity of the bulk export iron ore railway infrastructure by building new loops, and replacing a large number of rail locomotives with like-new locomotives. While only two of these investment programmes are directly rail related, depending on the capacity of the rail system to meet future port demands, the port investments should also impact positively on rail volumes.

While continued investment is likely to put a strain on the company, the Board is clear that, as a state-owned enterprise, it has an obligation to think in the long term, and not simply in terms of immediate annual profits. However, there is a contradiction in this social responsibility angle of Transnet’s mandate. The company receives no subsidy from government, even for infrastructure investment. As a result, in order to achieve its investment objectives, the Group is pushing hard to reduce operating costs. Given that personnel costs account for 52 per cent of overall operating costs, the squeeze is being put on workers in all the divisions of Transnet, but particularly in the two rail divisions.

“High Level” agreement with Transnet to cut costs

Soon after Transnet started to feel the impact of the global recession in late 2008, the CEO called a meeting of the Strategic Leadership Forum, a consultative structure comprising Transnet’s Executive team, and leadership of the two recognized trade unions. The volumes crisis and projections were presented to the unions, and various management proposals put on the table.

While SATAWU was alarmed at the downturn of volumes and revenue, it saw the crisis as an opportunity to extract some important concessions out of the management, mostly relating to restraining any tendency to unilateralism by management. The main items of agreement were:

• Transnet to prioritise local procurement (as opposed to foreign) and to engage with the trade unions on this issue
• Urgent mutual attention to be given to improving levels of safety
• The chief executive of each division to urgently engage at a divisional level with union leadership over specific volume and revenue issues, and possible cost cutting strategies
• The Strategic Leadership Forum’s primary role going forward to be to focus on the crisis, and emergency meetings to be called if necessary.

Management stated that they were reviewing their marketing strategy with a view to finding new customers. They conceded for the first time that the strategy of chasing bulk export commodities at the expense of local agricultural and manufacturing markets had been a mistake.

SATAWU gave management a stern warning that any attempt to undermine existing collective agreements or to introduce changes unilaterally would be vigorously resisted. It also pointed out that management had an obligation to lead by example on the austerity front. The payment of huge bonuses to executive managers at the end of the 2008/09 financial year subsequently became a bone of contention and is the subject of a SATAWU campaign to stop any such bonuses going forward.

Overtime

Transnet’s first target for cost cutting of labour costs was overtime. Up until August 2008, overtime accounted for 10 per cent of personnel costs across the Group, with a high proportion of that in Transnet Freight Rail. Train drivers andtrain assistants were working particularly high hours of overtime. It has up until now served management well not to translate the high levels of overtime across the 53,000 workers employed by Transnet into the equivalence of 10,300 full time jobs.

SATAWU’s position has been to support cuts in overtime rather than face job cuts. However the support has been conditional on the company urgently attending to a long overdue review of salary grades. At the time of writing these negotiations had just commenced. Management has also agreed to a SATAWU demand that debt counselling be put in place in order to assist workers who have lost income due to cuts in overtime.

Struggle over wages

Annual wage negotiations are centralised across the Group’s divisions. Negotiations for an increase commenced in late March 2009, with the union initially putting a 20 per cent demand on the table, in the context of an 8.4 per cent year on year increase in the cost of living. Management offered a zero per cent increase, with a commitment to no retrenchments for the period of a year. Predictably workers rejected this offer out of hand, and a strike was threatened. A wage increase of 7 per cent was finally agreed to in June, backdated to April.

SATAWU used the 2009 round of wage bargaining to put a demand on the table that all fixed term and casual workers be employed on a permanent basis, in line with the union’s campaign for decent work. While management refused to do this immediately, agreement was reached that a detailed audit would be done on the numbers of fixed term and casual employees, as a first step in further engagement on the status of these workers. At the time of writing, SATAWU was waiting for the results of the audit. As an interim measure, management agreed that fixed term and casual employees should be given first preference (subject to employment equity criteria) for vacancies that cannot be filled by internal applicants.

Transnet Freight Rail specific responses

Marketing strategies

In its pursuit of volume and revenue opportunities, Transnet Freight Rail management has carried out the following actions:

• Pursuing potential customers daily to persuade them to convert traffic from road to rail, by for example offering block trains for containers at competitive rates
• Spot selling spare capacity (e.g. one-off parcels at lower rates)
• Setting up a New Business Development department to pursue opportunities
• Joint marketing with Transnet Port Terminals.

SATAWU has taken the opportunity to argue for the company to become more proactive in playing a role in reducing the cost of transporting basic food, in particular grain. On SATAWU’s recommendation, a joint working group has been established. SATAWU has invited its sister Food and Allied Workers’ Union to participate in the working group.

Strict Cost Management

Early in 2009, management informed labour that increased levels of authority for approving expenditure were to be introduced. In addition they announced the following measures:

• A moratorium on travel. SATAWU argued that this must be subject to continued expenditure on travel of shop stewards and managers to consultative and negotiating meetings, in line with the existing Recognition Agreement. SATAWU said the crisis required more, not less, negotiation and consultation. This was agreed.
• Procurement contracts to be renegotiated. SATAWU argued that in the attempt to renegotiate the price of services, the company must properly audit all contracts to ensure that providers were not offering lower prices at the expense of their own workers’ wages, conditions of employment, or employment itself.
• Telephone cost reductions. Again, SATAWU reminded management that telephone expenditure of shop stewards was the subject of a collective agreement.
• Drastic reduction of consultants. SATAWU welcomed this as the union had seen teams of consultants come and go, often providing “advice” that adversely affected workers.
• Renegotiate the price of accommodation for overnight rest, for long distance train drivers and assistants. SATAWU supported this move, subject to the collective agreement covering the grade of accommodation.

Efficiency improvements

• Transnet Freight Rail has intensified its efforts to improve the turnaround time of wagons and locomotives, a process that began prior to the onset of the recession. New systems for tracking and tracing wagons and locomotives and for train scheduling have been introduced, with the support of SATAWU. Following the recession, approximately 400 locomotives and thousands of wagons have been parked.
• Management brought to the table proposals for the temporary redeployment of operating staff to depots where volumes remain high, namely depots dealing with the export and domestic coal, export iron ore and containers. SATAWU has supported the process of redeployment as a necessary measure to prevent job losses. However, the union has ensured that all affected workers are properly consulted and are treated fairly.
• Management started a process of consolidating and closing certain shunting yards prior to the onset of the recession. This process has now been expedited, with SATAWU aggressively defending the rights of workers who management wishes to redeploy to other yards.

Labour costs

In addition to the Transnet-wide drive to reduce overtime, Transnet Freight Rail management has targeted the following areas for cutting labour costs:

• No compensation for unused leave
• Absenteeism management
• Overtime limited to where business
• requirements justify this cost
• Moratorium on filling vacancies
• No work on rest days
• The small number of workers who were working a six-day week have now been moved to a five-day week (total working hours and therefore basic pay remains the same)
• Rostering of work more closely linked to demand and asset capacity.

SATAWU’s support of the above measures is conditional on the clear understanding that these measures are meant to prevent job losses, and that the savings must be ploughed

Conclusion

While the recession has brought hardship to many freight rail and related workers, especially through a reduction in take-home pay (by cuts in overtime, in particular), SATAWU has steadfastly kept its eye on the “jobs ball” as well as on the importance of positioning the railways for growth and development in the future. The Union has been prepared to engage on cost saving measures on condition that labour rights and employment conditions are not compromised; that no measures are introduced without prior consultation with the unions; and that savings must be ploughed back into investment in people and assets, and into the protection of employment.

SATAWU recognizes that this probably would not have been possible if South Africa’s rail and rail related companies were not state-owned. The successful struggle against rail privatisation fought five years ago has meant that there have not been shareholders baying at the door for returns at the expense of jobs, working conditions, and rail services. The pro-privatisation lobby has not gone away, however. SATAWU will therefore have to remain vigilant in defending public ownership of the railways, which has become more important than ever. The recession has revealed the bankruptcy of the current economic system and development path. We need to move away from the neo-colonial over-reliance on commodity exports, and towards diversification and inward industrialisation if we are to reach any level of long term economic sustainability. We will need our freight rail system to work closely with other economic arms of the state to support such changes.

This is the edited version of the “Report on the impact of the worldwide recession on the railways in South Africa, and SATAWU’S response” presented by Jane Barrett, Policy Research Officer, SATAWU, at the ITF Railway Workers’ Section Steering Committee meeting, London, 24-25 June 2009.

Documentos afines :
Informe de un sindicato ferroviario afiliado a la ITF. Número 11: Diciembre, 2009 (128kb PDF)

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