SA coal exports at 30-year low but mining sector appreciates Transnet’s new top brass

Source: Richards Bay Coal Terminal.

By Ray Mahlaka

25 Jan 2024

Since Portia Derby and Siza Mzimela resigned as executives of Transnet, the mining industry is finding joy in working with the state-owned enterprise to resolve its logistics challenges.

The management of the Richards Bay Coal Terminal is now finding it easier to collaborate with Transnet to fix its entrenched logistical challenges following recent sweeping leadership changes at the state-owned rail, port and pipeline company.

Alan Waller, the CEO of Richards Bay Coal Terminal, said the private sector was finding much joy in working with Transnet, which is now willing to receive external assistance to fix the logistics crisis that has undermined South Africa’s export activity, economy and public finances.

Richards Bay Coal Terminal is a coal-handling facility owned by 13 coal miners including Thungela Resources, Exxaro and Glencore. Through Richards Bay Coal Terminal, these companies rely on Transnet’s rail and port operations to export the coal they produce to markets.

During a media briefing on Thursday about the operational performance of the Richards Bay Coal Terminal in 2023, Waller did not mention Portia Derby and Siza Mzimela, the two former Transnet executives who resigned in September under a cloud. Derby (the former Transnet group CEO) and Mzimela (the former head of Transnet Freight Rail) have not been permanently replaced, with Michelle Phillips and Russell Baatjies acting in the respective roles.

Since the leadership changes at Transnet, Waller said, “There is a willingness to use the mechanisms in place to determine whether industry [the private sector] can assist or not. It [the relationship between Transnet and the private sector] was guarded in the past; there is now openness. There is a willingness to share the challenges and understand them. This has opened the door for collaboration.”

Nosipho Damasane, the chair of the Richards Bay Coal Terminal, agreed with Waller, saying that over the past four months, engagements with Transnet’s acting management had improved and the state-owned company was willing to accept help from the private sector.

Mining sector’s fractured relationship with Derby and Mzimela

The mining sector has long lobbied for Derby and Mzimela to be fired because, under their watch over the past three years, Transnet’s freight rail operations had become unreliable for industry, while ports became dysfunctional and were ranked among the world’s worst for operational efficiency. The private sector often viewed Derby and Mzimela as being militant, refusing help offered by the private sector.

Even after Derby and Mzimela left Transnet, the company’s problems persisted.

This can be seen in the performance in 2023 of Richards Bay Coal Terminal, which relies on Transnet’s railway infrastructure to move coal from mines, using heavy-haul locomotives and ports to export to overseas markets.

Richards Bay Coal Terminal exported 47.21-million tonnes (mt) of coal in 2023, which is down by 6.3% from the haulage of 50.35mt for 2022 and is the lowest level of exported coal since 1992 (see below).

Source: Richards Bay Coal Terminal.

Source: Richards Bay Coal Terminal.

The decrease in exported coal underscores the problems at Transnet, which struggles to haul bulk commodities, including coal, due to mismanagement of operations, the shortage of locomotives and spares, cable theft and the vandalism of infrastructure.

There is no maximum use of the Richards Bay Coal Terminal’s facilities, which have a capacity for 91mt of coal transported by rail and through ports every year. Problems with Transnet have forced the management of Richards Bay Coal Terminal to downgrade expectations for the volumes of coal exports in 2024.

The coal handling facility is now budgeting for 50mt in 2024. In January 2023, Richards Bay Coal Terminal was aiming for 60mt. However, there was a realisation by management that they were overly optimistic as Transnet’s woes were far from fixed.

“In our interactions with TFR [Transnet Freight Rail], we understand the challenges better. You are not going to turn the ship around quickly. It will take us a while to get there. We think 50mt is realistic,” Waller said.

Only now is the Transnet management and board moving to implement a turnaround plan for its rail network and ports.

Read more in Daily Maverick: Transnet’s turnaround plan is premised on securing a R100bn ‘capital injection’ from government

Acting Transnet Freight Rail CEO Baatjies said Transnet planned to get railage volumes back to 60mt. However, he didn’t commit to a timeframe. Baatjies said achieving this goal would require Transnet to get idle locomotives to move by resolving a long-running dispute between Transnet and China Railway Rolling Stock Corporation, and deploying security and intelligence measures to prevent theft and vandalism. DM

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Mining sector’s fractured relationship with Derby and Mzimela