Alarm bells for South Africa’s coal industry

 ·29 Jan 2024

Rail inefficiencies in South Africa have had a devastating impact on numerous sectors in the country, with mining being one of the hardest hit.

South Africa recorded historically low coal and iron-ore exports in 2023, but this is not because of a lack product – rather a lack of effective means to transport it.

A new report from consultancy research group, GAIN, looked to quantify what cost inefficient rail transport in South Africa had on the economy in 2023.

The group estimated that the issues in Transnet Freight Rail (TFR) has led to the “loss of around one billion rand this year [and the] projected loss for 2023 is R353 billion, equivalent to 4.9% of GDP.” These estimations are in line with those of the National Logistics Crisis Committee.

The coal industry in the country has been particularly hard hit, with the report saying that “export coal price[s] were lower than expected [in 2023], from a high of $296 in June 2022 and $98 in June 2023.”

Mining and environmental lawyer Hulme Scholes, said that South Africa’s coal industry is in “a very dire situation as [coal] companies are unable to get their product to port for export because of the Transnet situation.”

Speaking to Newzroom Afrika, Scholes said that most mining companies, especially smaller scale companies, “are stockpiling coal [as] they cannot afford to truck the coal for export,” as trucking is exponentially more expensive than train, with the cargo of “400 trucks being equivalent to one train.”

Shipments from South Africa’s biggest coal export facility, the Richards Bay Coal Terminal [RBCT], dropped by over 3-million tonnes in 2023 to its lowest in over three decades.

In 2023, RBCT only managed to handle 47.21 million tonnes – a 6.2% decline from 50.35 million tons in 2022 and an even further decline from a recent peak of 76.47 million tons in 2017.

This amount is less than half of its capacity, as the country’s freight rail crisis continues to throttle mineral shipments.

Mining companies “can’t make the turnover that they need to make to keep their businesses sustainable because they can’t export the product and are stockpiling it,” said Scholes, predicting that it will remain in place until “an effective turnaround strategy can be implemented.”

Scholes also said that whilst a large industry such as coal has been hard-hit, the affects of inefficient rail reaches across the mining sector, with widescale job losses already evident to date.

He predicts that there will be many more retrenchments in the industry “because of the inability to export the coal,” and other minerals.

In Transnet’s end of year results, the company said that volumes in “Transnet Freight Rail (TFR), were impacted by various operational challenges such as collisions and community unrest on the coal line and equipment challenges on the ore and coal lines, derailments, cable theft and power outages affecting all lines, as well as customer challenges on the coal and general freight business (GFB) lines.”

A Freight Logistics Roadmap was approved for publication by cabinet at the end of last year. “The immediate priority is to stabilise and improve the operational performance of the freight rail network, which presents a severe constraint on exports,” said Minister in the Presidency Khumbudzo Ntshavheni.

The roadmap outlines three area of intervention, which include:

  • Operations and rolling stock improvements;
  • Security and safety of the rail network;
  • A capital investment programme both for the expansion plans and also to sustain operations.

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