South Africa has even bigger problems than Eskom, warn mining experts

Transnet is causing even more problems for the South African mining industry than Eskom, said experts at 2023’s Mining Indaba in Cape Town.

They said mining companies had lost approximately R51 billion in revenue over the past 12 months because of locomotive shortages and railway lines being out of commission for extended periods due to cable theft.

According to the City Press, Mining Indaba delegates said Transnet’s problems stopped the mining industry from truly flourishing relative to the previous year.

Commodity prices were 90% higher in dollar terms at the end of 2022 than in 2021, yet the value of exports last year only increased by 2.5%.

The mining industry contributes about half a trillion rand to the South African GDP. If the mining industry had achieved export values comparable to the commodity price increase, it could have had a transformative impact on the national economy.

President Cyril Ramaphosa noted the problems at Transnet and said the SOE’s plans to embrace third parties on its routes will be a net positive.

“When we open up routes to third-party access, it will bring much-needed investment for the renovation, maintenance and rehabilitation of railway lines,” said Ramaphosa.

“We realise that we can only solve crises like this if we cooperate with the private sector.”

“This third-party access to railway lines shows that we want to [do that].”

President Cyril Ramaphosa

Transnet to streamline operations

Transnet has also indicated that it plans to shrink its 20,000km rail network by at least a third to prioritise profitable cargo loads.

“At this point, we can’t justify operating something which actually causes us to make a loss, and so that’s why there’s this revision of certain flows across the network,” said Transnet chief executive officer Portia Derby in an interview this week.

Transnet chief strategy and planning officer Andrew Shaw agreed.

“We can operate more effectively with a slightly smaller network,” said Shaw.

“It still serves the economic interest of the country, and it still allows additional operators.”

Trouble at Transnet

Transnet’s woes are not limited to infrastructure problems, however.

In October last year, The United National Transport Union (UNTU) told its members at Transnet to go on strike to demand a bigger wage increase.

Transnet had originally offered a 1.5% increase, and upon hearing of the risk of a strike, doubled its offer to 3%.

This was still not deemed to be acceptable, as it was well below the annual inflation rate of 7.6%.

Twelve days after the strike began, UNTU accepted raises of up to 6% and improved housing and medical benefits.

Lobby group Minerals Council South Africa estimated that the strike cost companies about R815 million per day due to daily shipments of iron ore, coal, chrome, ferrochrome, and other bulk minerals falling by about three-quarters.

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South Africa has even bigger problems than Eskom, warn mining experts