Transnet decline cost SA miners R50bn in potential income this year, says Minerals Council

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Transnet Freight Rail is hobbling SA's mining exports.
Transnet Freight Rail is hobbling SA's mining exports.
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  • Transnet's capacity to move bulk minerals is declining. 
  • With prices at record highs, other economies have ramped up production. 
  • The consequence is lost potential in earnings, tax revenue and jobs. 
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The deterioration of Transnet's capacity in rail and ports has cost the mining industry R50 billion in lost opportunities in 2022 alone, says the Minerals Council. 

The poor performance of rail, which is well below targets, cost bulk mineral exporters R35 billion in lost revenue in 2021. 

While other mining economies have ramped up output to take advantage of record-high prices, SA has not been able to do the same.

Minerals Council CEO Roger Baxter outlined South Africa's logistics constraints in a presentation to the Joburg Indaba Summit on Wednesday.

Declining rail deliveries – the result of crime and cable theft (1 500km copper cable has been stolen in five years), onerous government procurement rules, vandalism, idled locomotives bought in a corrupt transaction and poor maintenance – are the main reason for falling productivity at rail and ports, he said. 

Constrained or lost production affects mining companies, the economy and fiscus more broadly as SA loses out on potential employment and tax revenue. The council estimates that without logistics constraints, mining could have added another 50 000 jobs and increased the tax take for 2021 by about R27 billion.

In the case of iron ore, export sales could have earned R16 billion more had export targets been reached in 2022.

If the target was raised to an optimal level, another R33 billion would have been earned from iron-ore exports. For the fiscus, this equates to R3 billion in forfeited taxes or R6 billion had the industry been able to export the optimal amount. 

READ | Commodity boom remains untapped as SA fights rail woes

While coal prices reached a historical high last month at $452 per tonne, SA's export volumes have been falling.

Between 2015 and 2019, SA exported 72 million tonnes per annum (MTPA), but by 2021 coal exports had dropped to just above 50 MTPA. Baxter says the council estimates that 2022 will be no better. If Transnet Freight Rail improved its capacity, the Richard's Bay Coal Terminal would be able to export 91MTPA. 

The poor rail infrastructure has led miners to increasingly use roads to move bulk minerals. For instance, manganese producers now move between 6 to 7 million tonnes by road and 14 to 15 million tonnes by rail. Moving manganese by roads increases costs by R350 to R400 a tonne. 

"There is an urgent need for real partnerships between bulk mining companies, rolling stock providers, Transnet and government focused on jointly agreed solutions that benefit all parties and the country. Treasury also urgently needs to consider emergency funds to maintain the rail corridors for bulk commodities, recovering the investment through improved tax generation on mineral exports," said Baxter.

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