THE situation facing South Africa’s commodity exporters was as severe as the country’s energy crisis but it was not getting the same level of recognition because it was not “in the public’s face,” according to Minerals Council CEO, Roger Baxter.
“Energy is much more obvious because people can see the energy crisis we are facing. Stage four load shedding is in our faces every day. But how many people know that at the logistics level the performance is as bad as what it is at the energy level?”, he asked during a presentation to the Joburg Indaba, a conference.
In a grim assessment Baxter spelt out the actual and opportunity costs in terms of revenue to the mining industry and lost taxes to the Treasury being caused by Transnet’s inability to rail target volumes. He estimated that an extra R151bn could be earned in annual export revenues if the “optimised” logistical levels were achieved across the country’s main bulk commodity exports.
By far the greatest losses were being racked up by the coal industry where Baxter said coal was selling currently at record prices around R3,800/t but “we can’t get it to market”. He also pointed out major losses of revenue were being incurred on other commodity exports including iron ore, chrome and manganese .
Baxter said the costs being incurred could be broken down into the actual losses from lower tonnages being shipped against targeted tonnages and the “opportunity costs” of the additional tonnage that could have been exported if the “nameplate” capacity of the installed infrastructure had been achieved.
He added that at current rates total iron ore exports on the dedicated Sishen-Saldanha rail route were estimated at 51 million tons (Mt) for 2022 which was 8Mt below target and 9Mt below nameplate capacity.
This meant R16bn would be lost this year comparing actual sales to target sales but that rose to R18bn comparing actual sales to what could have been earned if exports had matched nameplate capacity.
But Baxter took it further pointing out that the optimal iron ore export channel capacity was 67Mt/year which meant revenues totalling R33bn were being “forfeited.”.
Turning to coal Baxter said the Richards Bay Coal Terminal (RBCT) had exported on average 72Mt/year from 2015 to 2019 but only managed 50Mt in 2021 – the lowest since 1996 – because of Transnet’s inability to rail the coal. That cost the coal industry R16bn in lost export earnings measuring actual against target export volumes.
Target RBCT exports for this year are 60Mt, but Baxter reckons the actual tonnage moved is likely to be around 50Mt representing an opportunity cost of R30bn measuring actual against target tonnages. This number more than doubled to R63bn if the actual exports were measured against the coal line nameplate capacity of 78Mt/year.
The shortfall on meeting nameplate capacity also translated into a R12bn opportunity cost in tax to the Treasury.
Baxter said the solution lay in encouraging private sector involvement and partnerships on the key railway corridors and ports to get back to target and then focus on growth.
He concluded that there was an urgent need for real partnerships between the bulk mining companies, Transnet and Government.