South Africa’s Transnet has announced a deadlock in wage negotiations, with two labour unions raising the prospect of a strike that could affect Africa’s most advanced economy.

In its statement, the company said a wage dispute had been formally declared with the South African Transport and Allied Workers Union (SATAWU) and the United National Transport Union (UNTU) after negotiations which started in May.

Transnet mentioned that the unions had rejected its offer of a 1.5 percent increase in employees’ pay, excluding medical and housing allowances.

UNTU General Secretary Cobus van Vuuren told Reuters that his union had rejected Transnet’s offer as it was way below the inflation rate, recorded at 7.8 percent year-on-year in July.

“However, if there’s no compromise reached by the parties, that would enable labour to go through a balloting process where members will mandate whether we can embark on protected industrial action or not,” van Vuuren said.

SATAWU described Transnet’s offer as an “insult” however it remained open to further negotiations.

“SATAWU wants to emphasize that going on strike is not our priority. However, at this stage, the employer is forcing us to go through that route,” it said in a statement. Meanwhile, Transnet has been operating below capacity due to a shortage of locomotives, inadequate maintenance, vandalism and theft of its infrastructure, costing miners billions of Rands in potential revenue.