Despite bulk mineral exports being State-owned Transnet’s single biggest client base, South Africa is unable to access the full benefits of minerals exports, Minerals Council South Africa CEO Roger Baxter told delegates attending the first day of the South African Heavy Haul Association (SAHHA) 2022 conference on August 2.
He said it had been a challenging last couple of years, with a deterioration in Transnet’s rail performance.
Baxter pointed out that the Transnet team was aware of this and was working to slow the rate of decline; however, a lot more work still needed to be done.
He also stressed that it was imperative for Transnet, government and the mining sector to collaborate on resolving the situation.
Baxter said there had been a considerable opportunity cost to South Africa as a result of the rail constraints.
He elaborated that for coal, at 2021 prices, the industry lost R16-billion in export earnings, when delivered tonnages are measured against target.
For iron-ore, at 2021 prices, the industry lost R17-billion. Baxter highlighted that the country’s iron-ore was regarded as a premium product traded in global markets, and was very much in demand, and therefore, the country should be capitalising on that and maximising global exports.
For manganese, however, Baxter said exports had grown strongly since 2016, with yearly values growing by 12% on average and tonnages by 17%. He noted that this strong performance was owing to higher mining production and the unique situation of several harbour outlet operations.
However, there was heavy reliance on road transport for getting this commodity to port and committed rail targets were not being met.
Meanwhile, for chrome ore, Baxter said that, in 2021, the opportunity cost of actual versus target was R3-billion.
Moreover, he noted that the Maputo port, in Mozambique, was benefitting at the expense of South Africa, with exports increasingly being diverted away from Richards Bay to Maputo.
Ferrochrome exports were also being diverted to Maputo and Durban from Richards Bay.
Baxter averred that, if the country could optimise exports in each major bulk commodity, by, in the medium term, focusing on proper public-private partnerships, this could drastically change the country’s landscape in three to five years.
Transnet Group chief strategy and planning officer Dr Andrew Shaw outlined that the issues facing Transnet included a weak financial performance, operational issues and shifting policy and regulation.
He elaborated that the operational issues were not only of the entity’s own doing, for example, a considerable challenge relates to safety and security, with theft and vandalism of infrastructure making it very difficult for Transnet to operate properly.
To address these challenge, and meet its medium- to long-term growth ambition, Transnet has adopted a new approach, with the need to rebalance its broad portfolio of segments.
Shaw said the focus of the stabilisation and growth efforts would be on the core segments that Transnet believed could create an advantage. This included mining, automotive, agriculture and fuel and gas.
Shaw said that this would see Transnet partner with the private sector to improve its value offering and compete more effectively.
He said Transnet wanted the private sector to be a capital contributor, but, further than that, to also bring its operations and maintenance expertise to the table.
This was aligned with Baxter’s request that the private sector wanted to be more involved, and did not merely want to be seen as a source of capital.
Shaw noted that, as a means of realising an immediate impact and improving the performance of Transnet, a back-to-back programme had been developed.
Meanwhile, Baxter said the Minerals Council was proactive in tackling the difficulties in transport logistics through regular engagement with Transnet and government.
The council has also established commodity-specific terms to address challenges on each of the key corridors in cooperation with Transnet management.
Moreover, Baxter said the council was an active member in Business Unity South Africa, which is also engaging Transnet and the government to resolve logistics constraints.
He further noted that the coal industry had contributed more that R100-million towards improving security on the COALlink, considerably reducing crime incidents and associated disruptions.
He added that similar private-sector intervention models were under review for the chrome and manganese rail corridors.
Baxter said mining companies have offered engineering and procurement expertise to assist Transnet.
Stellenbosch University Professor Jan Havenga pointed out that while the future of heavy haul was not mining, the sector needed mining to fund it now and enable it to progress.
He indicated that Transnet’s General Freight Business at present was less than half of what it should be, and had to quadruple by 2050.