Durban - The almost two-week long strike at Transnet may be over but its effects will be felt for the next few months as retailers scramble to fill shelves ahead of the festive season.
Despite signing Transnet's latest wage offer, the South African Transport and Allied Workers Union called off the strike and urged staff to go back to work. The union is still engaging with the employer.
Meanwhile, the United National Transnet Union has agreed to a three-year wage deal which includes a 6% increase for the first and third year and a 5.5% increase in the second year.
Head of logistics at Investec for Business, Denys Hobson, said lost sales or not having stock on shelves are some of the threats for retailers. He said those carrying sufficient inventories, are likely to weather the storm for now but for those retailers that are typically importing promotional goods or specific goods and brands for launches and of course the festive season, it could be damaging.
“Launches may need to be delayed or cancelled, there is a risk of obsolete stock or they may need to discount product to make sales – all these scenarios place pressure not only on brand reputation but on working capital and market share as well. For other retailers that need to get emergency stock in and decide to turn to airfreight will have to deal with higher landed costs and ultimately the consumer will pay for the higher price if the higher costs can’t be absorbed by the importer,” he said.
Hobson said there are multiple knock-on effects from the protest.
“In the immediate term, depending on how long it takes to formalise a resolution, the congestion in the ports will become unsustainable as yard capacity increases. Many of the shipping lines also don’t want to wait too long to discharge cargo – so we may see them divert to alternative ports or worst-case scenario go back to origin. In the short to medium term for future bookings, we may see bookings suspended or delayed sailings which creates further backlogs,” Hobson added.
He said this in turn ups demand for later sailings and will likely see an increase in freight rates or importers diverting to airfreight – both of which increase pressure on importers and their margins.
Hobson said additionally, more and more importers and exporters are using alternative ports such as Walvis Bay and Maputo which results in lost revenue for Transnet. South Africa’s GDP, jobs and investor confidence to name a few are all negatively impacted.
Hobson said not much can be done for cargo already stuck at the port.
He said for those importers that are still looking to ship in goods there are a few options – including looking at alternative routes and ports such as Maputo or Walvis Bay for example.
“Importers could also look at airfreight options but this can be costly. From an export point of view – there is certainly a lot of engagement happening between the relevant and impacted parties - but the only option, outside of a resolution, is to look at other export port options outside of South Africa – which again can have far-reaching implications for businesses. A significant amount of export bookings from South Africa have already been suspended by the shipping lines,” Hobson said.
He said there is constant uncertainty.
Hobson explained that importers and exporters have been dealing with unpredictability for the last two years and this is just another case in point when there is uncertainty around the outcomes and next steps, not to mention financial pressure.
“We know that port and rail operational performance have been poor and that has really hindered supply chain performance and while the private sector has been very resilient and there has been substantial investment into infrastructure and improving supply chain capabilities, right now this continued volatility doesn’t instil much confidence for further investment,” Hobson said.
IOL