SA lost R30bn in coal exports owing to ‘Transnet inefficiencies’, says Minerals Council

THE Minerals Council today squarely laid the blame for the bulk of some R30bn in lost South African coal export revenue last year on Transnet inefficiency.

“We know that only about 20% of the lost tonnages were due to cable theft and electricity disruptions on the coal rail corridor,” said the council’s chief economist Henk Langenhoven. “The bulk of the explanation lies with inefficiencies on rail and in the ports.”

Transnet said last year it was “under attack” from criminal syndicates that steal copper cable used on the rail routes, especially from Mpumalanga province to Richards Bay in KwaZulu Natal. It also said that vandalism and sabotage – some of it by repair service providers seeking to illicitly win business from Transnet – were responsible for derailments.

However, Langenhoven’s comments give some explanation as to why the Minerals Council requested the resignation of Transnet CEO Portia Derby as well as Sizakele Mzimela, CEO of Transnet’s largest division, Transnet Freight Rail (TFR) in December.

Langenhoven’s comments follow an operational review by Richards Bay Coal Terminal, owned by mineral exporters, which said that coal exports fell to a 30 year low of about 50 million tons last year. It had targeted exports of 60Mt for 2023, but it’s questionable given recent performance if TFR would be able to achieve these deliveries.

Said Langenhoven: “This reality has prompted the Minerals Council’s board to urgently approach the Transnet Board to facilitate a joint effort to find solutions for the problems on the bulk commodity export lines”.

He said that “intensive work” had started at board level between the two companies at a managing steering committee and at technical level on the export channels for coal, chrome, iron ore and manganese.

The Minerals Council said the weighted average price of export coal for 12 months to November was R2,973 per ton at a time when “world demand was at a peak” owing to energy security concerns, especially in Europe amid Russia’s invasion of Ukraine. “The Minerals Council estimates that R30bn worth of coal did not go through Richards Bay Coal Terminal.”

Earlier this month, News24 cited a letter it had seen sent by Minerals Council president Nolitha Fakude to Transnet’s board in which she said that current management “cannot resolve the crisis and are not capable of turning around the performance”.

“Given that Transnet SOC’s operating performance is deteriorating, we cannot see how the company will avoid breaching its debt covenants early in 2023, at which stage the directors of Transnet SOC will need to place the company into liquidation or risk being sued for trading recklessly,” said the letter.

The bulk commodity mining companies that are members of the Minerals Council are now demanding urgent action on this crisis, as it is now posing an existential crisis for Transnet and for the mining companies.”