Trouble for one of South Africa’s biggest employers
South Africa’s coal mining industry, a vital pillar of the country’s economy, is facing significant challenges that threaten both its future and the livelihoods of thousands of workers.
With declining commodity prices, logistical inefficiencies, and a growing global shift toward cleaner energy, the industry stands at a critical juncture.
If these issues are not addressed, the sector could see significant job losses and missed economic opportunities, potentially destabilising the broader economy.
One of the most pressing issues facing South Africa’s coal industry is the decline in logistical efficiency, particularly regarding the rail and port networks essential for transporting coal to export markets.
In the past, the country’s rail and port infrastructure, managed by state-owned Transnet, provided efficient and affordable transport of bulk commodities like coal and iron ore to international markets.
However, in recent years, Transnet’s performance has deteriorated, causing severe bottlenecks for miners trying to export their products.
The impact of these logistical inefficiencies has been staggering.
According to the latest estimates from the GAIN Group, South Africa’s underperforming logistics system resulted in a loss of R353 billion in economic activity alone.
Coal miners, heavily reliant on the North Corridor rail line that leads to the Richards Bay Coal Terminal, have been hit especially hard.
Similarly, iron ore miners, dependent on the Ore Corridor from the Northern Cape to Saldanha Bay, face severe challenges in getting their products to port.
Given the size of the ships required to transport these bulk commodities, road transport is not a viable alternative.
The Bureau of Economic Research (BER) has highlighted the missed opportunities caused by Transnet’s failures.
During the commodity boom of 2020 and 2021, when coal and iron ore prices surged, South African miners were unable to capitalise fully on the global demand spike due to logistical constraints.
This has cost the industry billions in revenue and stunted the country’s potential foreign exchange earnings.
The coal mining sector is a vital source of employment in South Africa, directly supporting tens of thousands of jobs and indirectly sustaining many more through related industries.
A poorly managed transition away from coal could have devastating consequences for workers and communities dependent on coal mining.
Research from the South African Reserve Bank warns that if coal mining collapses, the country could lose up to 92,000 direct jobs.
Even more alarming is the multiplier effect: for every job lost in the coal sector, an additional 2.7 jobs are lost in the broader economy.
This works out to almost a quarter of a million jobs (248,400).
These job losses could ripple through local economies, leading to increased poverty, social instability, and greater pressure on the government to provide support to affected communities. The scale of this potential crisis underscores the need for careful planning and intervention to manage the industry’s decline and transition.
Compounding the coal industry’s logistical and economic challenges is South Africa’s commitment to transitioning toward a low-carbon economy.
With 83% of the country’s electricity generated from coal, the sector plays a central role in powering homes and industries.
However, as part of global efforts to reduce carbon emissions, South Africa has committed to winding down its coal dependency.
The country aims to significantly reduce greenhouse gas emissions and is on track to meet its goal of limiting global warming to below 2°C.
While this transition is necessary for environmental sustainability, it also presents significant risks to the economy.
South Africa’s carbon-intensive economy and its reliance on coal exports make the country vulnerable to shifts in global energy demand.
A study by the South African Reserve Bank estimated that the country faces a transition risk of more than $120 billion (R2.2 trillion) between 2013 and 2035, largely due to its coal dependency.
This includes a projected loss of $83.7 billion (R1.5 trillion) in coal export revenues.
Experts agree that the transition away from coal must be managed carefully to minimise economic disruption and job losses.
The researchers from the South African Reserve Bank emphasise that halting the transition is not an option, but its pace and management must be carefully controlled.
Key to this process will be reskilling workers to enable them to find employment in other sectors, particularly in renewable energy industries that are expected to grow in the coming years.
Pierre Monnin, a researcher at the South African Reserve Bank, suggests that proactive policies are needed to support coal-dependent regions through the transition.
“The decline of coal must be managed appropriately. Workers should not be left behind as the country shifts towards a low-carbon economy,” Monnin noted.
South Africa’s coal mining industry is at a crossroads.
The pressures of declining commodity prices, logistical failures, and the global shift toward cleaner energy are all converging to create an uncertain future for the sector.
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