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Intervention urgent to resolve rail, port problems, says Business Leadership South Africa

Business Leadership South Africa CEO Busi Mavuso.

Photo by Creamer Media

Tonnage railed.

Export capacity from Richards Bay Coal Terminal.

30th January 2023

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – Urgent intervention is required to resolve the problems of South Africa’s freight rail system and ports, says Business Leadership South Africa (BLSA) CEO Busi Mavuso, who in this week’s BLSA newsletter describes the coal export slump through Richards Bay Coal Terminal (RBCT) as startling.

“The real economic damage to the economy is immeasurable…it's an appalling situation and one which BLSA is working hard to rectify,” writes Mavuso.

As reported by Mining Weekly on Friday, coal exports processed through RBCT last year nosedived to 50.35-million tons, the lowest since 1993, at a time of very high demand, soaring coal prices and an RBCT export capacity of 91-million tons.

Coal is railed to the private-sector RBCT by the public-sector Transnet Freight Rail, which managed to deliver only 50.43-million tons in a year disrupted by a strike, derailment and rampant copper cable theft, with copper theft still taking place with as much intensity as ever.

However, Minerals Council South Africa chief economist Henk Langenhoven calculates that the bulk of the opportunity loss lies with inefficiencies on rail and in the ports.

The gap between what South Africa's coal mining companies could produce and what they could export last year represents a loss of at least R80-billion, The Economist of London calculates, quoting Stellenbosh University’s Jan Havenga, who adds that the total hit to South African firms from lost exports and the extra costs of going by road will amount to 6% of 2022’s gross domestic product – some R400-billion.

Mavuso expresses the belief that opening freight rail and ports to private-public partnerships, as well as using other means to encourage private sector participation, is critical to resolving the problems.

BLSA's viewpoint is that a combination of lack of expertise and lack of finance makes it impossible for government to rectify things on its own.

In 2017, BLSA signed a contract with South Africa, committing business to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.

It was in this context that BLSA hosted an engagement with Transnet CEO Portia Derby on Tuesday last week.

“While Derby’s presentation was under the Chatham House Rule and we cannot divulge details, the issues in the public domain make it clear that she faces a monumental task in addressing the challenges and that urgent intervention is required.

“Opening both the freight rail system and our ports to private-public partnerships, as well as using other means to encourage private sector participation in the industry, is critical to resolving the problems.

"The status quo is simply not working and while there may be short-term measures available to temporarily alleviate the main pressure points, the long-term solution is for government to partner with business, which can introduce efficiencies, capital and expertise,” Mavuso writes.

BLSA’s assistance with reforms in the transport sector are channelled mainly through Operation Vulindlela, the unit in the Presidency that works with National Treasury to overcome obstacles to reforms, and the current focus is on providing expertise on operations and infrastructure in freight and logistics.

The organisation reports that Operation Vulindlela is working across a number of priority reforms in the freight transport sector to improve the performance of ports and rail infrastructure. This includes enabling third-party access to the freight rail network and facilitating private sector participation in container terminals, as well as establishing an economic regulator to ensure completion in the transport sector.

A core issue to resolve in order to undertake market reform and fulfil the objectives of the White Paper on National Rail Policy is addressing the backlog in investment and maintenance of existing infrastructure and improving operational performance on strategic corridors.

“For meaningful change to occur, we need to accelerate the efforts for private sector participation and improve on what’s already happening – for example, the two-year time period for access to the freight rail network is far too short to hold appeal for private sector operators.

“This is a drum BLSA will continue to beat for as long as is necessary. A combination of lack of expertise and lack of finance makes it impossible for government to rectify things on its own,” adds Mavuso.

HITTING COAL'S HIGH SPOTS

Indonesia Energy and Mineral Resources Minister Arifin Tasrif said on Monday that Indonesia planned to produce 695-million tons of coal this year with exports of 518-million tonnes, a level that would mean record shipments out of the country.

In 2022 Indonesia produced 687-million tonnes of coal and exported 494-million tonnes, Tasrif disclosed.

Last year’s Indonesian coal production was higher than the targeted 663-million tons, even though there was an export ban at the start of the year that caused some mining companies to hold back on output, as well as heavy rains that disrupted operations.

Edited by Creamer Media Reporter

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