Transnet collapse costs mining R50bn

The mining industry in South Africa is being crippled to the tune of over R50bn in lost revenue due to the disastrous performance of Transnet. CEO of the Minerals Council South Africa, Roger Baxter, recently bemoaned the logistics crisis befalling the country, with commodities struggling to get to destinations. It’s not only the mining industry affected, the entire economy – beholden to transporting almost everything via road due to the putrid state of rail – continues to feel the knock-on effects of an ineffectual and failing state logistics operator. This piece was first published by Daily Friend. – Michael Appel

Transnet bottlenecks as bad as loadshedding

Staff Writer

The performance in logistics infrastructure is as bad as loadshedding. This has resulted in about R50bn in revenue being lost in the mining industry for the year to date. 

“SA mining is being held back by a logistics crisis driven by poor performance of Transnet Freight Rail and Transnet Port Terminals. This is as serious as the electricity crisis,” Roger Baxter, CEO of the Minerals Council South Africa, told a mining conference on Wednesday. 

If South Africa managed to fix the logistics bottlenecks, the mining sector could earn an additional R150bn in revenue through exports of coal, chrome, ferrochrome and manganese. 

“That is a huge number — it would raise taxes paid by the industry by about R27bn and enable the sector to increase employment from about 459,000 to 500,000 direct jobs.”

Iron ore, coal, chrome and manganese rail deliveries are well below target. In 2021, about R35bn in revenue was lost by bulk mineral exporters when measured by rail deliveries against the target for the year, said Baxter. 

Year-to-date record commodity prices, when set against production decreases, have resulted in about R50bn in lost revenue. 

Saldanha iron ore line’s performance has steadily declined, with the percentage of contracted volumes actually railed to port decreasing from about 95% between 2017 and 2019 to about 85% between 2020 and 2022. 

‘This means this year we’re going to see roughly R16bn to R18bn in lost revenue [from iron ore exports],’ said Baxter. 

Before Covid-19, export volumes of coal were about 70-million tonnes. This year South Africa may get to 50-million tonnes, this while coal export prices increased about 400% over the past two years. 

The revenue lost is about R30bn for 2022. This increases to R63bn when comparing actual exports with the 78-million tonne nominal capacity of the coal line. 

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