Transnet woes force Kumba to pull the layoffs trigger, putting 490 jobs on the line

Kumba announced the planned job cuts when the company unveiled its annual results on Tuesday, the same day that Statistics South Africa said the country’s unemployment rate had risen to 32.1% from 31.9%. 

State failure is the key reason behind both Kumba’s looming layoffs and South Africa’s shocking unemployment rate. 

“Following a strategic review in 2023, Kumba is reconfiguring its business to an overall lower production profile of 35 to 37 million tonnes (per year) for the period 2024-2026, in line with prevailing logistics capacity,” the company said in a Sens announcement. 

This means that it has to cut production because Transnet’s operational woes – which include rampant copper cable theft, a lack of functional trains and just plain shoddy management – mean it cannot get all of its produce to port by rail. 

The company ditched plans in December to increase production in the face of the logistical constraints. Kumba had at one point wanted to boost sales and production to 42 million tonnes per year, but now it plans to produce less. 

Less production in turn means less revenue and it all adds up to rising costs if the headcount remains the same. So, Kumba is going to prune up to 490 jobs on top of 110 that were cut from head office last year, or about 10% of its workforce in total.

“... despite the extensive measures taken to mitigate the impact of the logistics challenges on our business, Kumba has announced a proposed reconfiguration process. As the reconfiguration will, regrettably, involve job losses, it will be carried out in consultation with our stakeholders ... in terms of section 189A of the Labour Relations Act, 66 of 1995 (S189A),” the company said.

“In parallel, a contractor/vendor review process is under way that may see 160 service providers/contractors impacted. This could result in some of the contractor services being rescoped or terminated as part of the business reconfiguration process.”

So, it looks like some of the company’s service providers will lose Kumba’s business, and the ripple effects are likely to mean they will also cut jobs. 

It’s the second “Section 189” and service provider review process to be issued by an Anglo company this week, following Anglo American Platinum’s (Amplats’) announcement on Monday of up to 3,700 job cuts, or 17% of its workforce. 

Read more in Daily Maverick: Amplats to retrench up to 3,700 workers in ‘last resort’ as PGM prices, profits sink

Amplats’ restructuring is driven largely by the meltdown in platinum group metals (PGMs) prices. Kumba’s is driven solely by Transnet’s meltdown. 

Indeed, partly because of higher prices for its product, Kumba’s basic headline earnings per share for the year rose 26% to R70.80. It declared a final dividend of R24.20 per share, up 48% on the previous year. 

If not for Transnet, the results would have been better. 

“We need to align our production to the current operating environment primarily from a logistics perspective,” Kumba CEO Mpumi Zikalala told journalists on a conference call. 

Zikalala pointedly noted that Transnet was not just a millstone around Kumba’s neck. 

“The country as whole would be in a much better space. Resolving the logistics challenges will actually have a massive impact on the GDP of the country,” she said. 

Zikalala also said she remained hopeful that “the right individual will be appointed” as CEO of Transnet.  

The acting CEO of Transnet, Michelle Phillips, has emerged as a frontrunner among the candidates who have been selected by the state-owned transport group’s board to take up the top job permanently.

Read more in Daily Maverick: Acting Transnet boss Phillips emerges as frontrunner after board lists preferred CEO candidates 

Meanwhile, the costs of Transnet’s unfolding crisis are mounting, and workers and their dependants – not to mention service providers and their staff – are paying the highest price for this aspect of state failure. DM