Rail shambles is as big a problem to SA as load shedding

SA has lost up to R30 billion in coal sales so far this year because Transnet was unable to handle the volumes demanded by customers in energy-starved Europe and Asia, said Minerals Council SA CEO Roger Baxter, speaking at the Joburg Indaba this week.

All told, SA lost a potential R50 billion in bulk mineral exports so far in 2022 because it was unable to meet targeted export volumes. This comes on top of R35 billion lost for the same reason in 2021.

When it comes to iron ore exports, the loss in sales total R16 billion because the Sishen-Saldanha rail route is expected to handle 9 million tons (Mt) less than its 60Mt/year capacity. That figure doubles to R33 billion because the rail line operates well below its optimal capacity of 67Mt a year.

Apart from lost minerals sales, Treasury was losing about R12 billion in forfeited taxes.

Mesela Nhlapo, CEO of the African Rail Industry Association (ARIA), says government has already agreed to allow private rail operators third party access to the rail network. This plan just needs to be implemented according to the National Rail Policy.

According to the latest StatsSA research, less than a quarter of all freight moving around the country is transported by rail. This has implications for road safety and the general state of road surfaces.

PwC’s Mine Report 2022, based on a survey of nearly 30 of the largest mining companies, outlines the problem facing coal exporters.

Apart from diminished rail capacity, SA’s key ports are rated among the worst in the world, according to the World Bank Container Port Performance Index.

The coal link to Richards Bay only delivered 60Mt last year, against its stated capacity of 90Mt. The road infrastructure of the manganese corridor to Coega in the Eastern Cape and the coal corridor to Richards Bay have been damaged by the more than 1 000 40-tonne trucks using these corridors due to a lack of sufficient rail capacity.

Read: SA mines start to open their capex wallets

That’s created problems of a different kind. Last month 19 school pupils and two adults were killed by a coal truck travelling in the oncoming lane on the N2 at Pongola, en route to Richards Bay.

Pongola resident Adrian Changing-Pearce says 1 750 trucks a day, most of them carrying coal, have been counted on the N2. “These trucks have a total disregard for residents and the rules of the road. Ninety percent of the trucks on this route are side-tippers used by coal companies, and they are not only a danger to residents, they are also destroying the roads.”

Nhlapo says the huge number of trucks on South African roads increases the probability of people being killed in accidents and fatalities can be greatly reduced by moving freight to the country’s rail network.

Read: RFA: ‘It will take a miracle to move most road freight to rail in five years’

Outraged Pongola residents have reportedly warned truck drivers to avoid the area or risk having their vehicles burned. Since the accident, coal trucks are reportedly using alternative routes to Richards Bay, but this will have a detrimental effect on roads that are not designed to handle this kind of traffic.

“Once the trucks leave Piet Retief (in Mpumalanga), there’s a steep descent and this is the cause of many of the accidents we are seeing on this road.

“We’ve been averaging about two deaths a week from road accidents in this area,” says Changing-Pearce.

SA’s largest coal exporter, Thungela Resources, announced bumper profits for the year to June 2022 as realised coal prices shot to $240/t from $75/t the previous year. It is resorting to trucking to supplement Transnet’s diminished rail capacity, forcing it to reduce its forecast export volumes to between 13Mt and 13.6Mt from the previous target of 14-15Mt.

Freight Rail, the Transnet division handling coal transport, has started roping in customers to assist in snuffing out cable theft, including drone technology and added security measures.

The company reported that 1 500km of cable was stolen in the 2022 financial year, a nearly 1 096% increase over five years, with a net financial impact of R4.1 billion.

Fire, lack of locomotives and social unrest in Gauteng and KwaZulu-Natal in July 2021 were some of the other factors throttling Transnet’s ability to move bulk commodities.

A key bottleneck that’s holding back mining exports is port handling. The World Bank Container Port Performance Index ranked Durban, Cape Town and Ngqura in the bottom 10 ports out of 370 locations analysed globally. “Years of inadequate maintenance of the country’s rail infrastructure has had a negative impact on mining firms. In 2021, a major iron ore producer flagged concerns pertaining to the country’s rail-to-port challenges and the negative impact this had on the firm’s production output,” says PwC.

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SA mines start to open their capex wallets

Andre Joubert, chief executive of ferrous division at African Rainbow Minerals, told the Joburg Indaba that there are positive signs of change as private sector companies were coming together to form consortia to help solve some of the big problems facing the sector, such as rail transport.

Mpumi Zikalala, CEO Kumba Iron Ore, said a key challenge for the sector was getting Transnet rail lines to operate at peak capacity, and Kumba was working with the state-owned logistics provider to help solve some of the logistics issues it faces.