Rail and Power Issues Hinder South Africa
“We could ship another 50-billionrand ($2.7 billion) if Transnet could provide the service that it said it would,” said Mpumi Zikalala the CEO of Kumba Iron Ore. She was speaking at the Jo’burg Indaba, an annual mining symposium held in Johannesburg now in its 10th year.
Covid had been especially harsh to the country’s rail infrastructure. Large sections of track were stolen for scrap metal, as was many kilometers of copper wire. At the same time maintenance of rolling stock had also fallen behind, resulting in locomotives sitting idle waiting for repair.
Kumba along with other exporters was in talks with Transnet to try to find solutions. Zikalala said the rail operator didn’t require more rolling stock or additional rail capacity. It could meet the requirements from existing equipment, provided it was managed properly. “The question is how to get Transnet to run at peak,” she said. “There’s no need for additional rail or rolling stock. It’s about getting the maximum out of the system. Here, maintenance is key.”
It’s not only iron ore that is affected. André Joubert, the chief executive of the Ferrous Division at African Rainbow Minerals (ARM), says exports of ferrochrome were also being harmed by the lack of support from Transnet. ARM ships ferrochrome out of the Eastern Cape province of Koega, but the line couldn’t fully service the mines. “If Transnet was able to deliver to Koega at the rate it said it would, we could meet our full 4.7 million mt/y capacity,” Joubert told the symposium. “Transnet, it’s not our fault, but it is our problem.”
Portia Derby, group chief executive at Transnet admitted the rail operator had struggled of late. “Around 60% of our fleet is old. And old locos fail.” Newer locomotives from China had been added to the fleet, but these required imported spares for maintenance. Now, with China still undergoing bruising covid-related lockdowns, spare parts were hard to come by, leaving locomotives stranded in their yards.
Transnet received little support from the government, Derby notes. “We have to fund it entirely ourselves. Germany, for instance allocated nearly EUR $60 billion for its rail network over the next 10 years.” However, new locomotives were being sought, which could add another 14 million tons capacity to the coal line alone. The state had also amended the law, to allow Transnet to establish its own police force that would have powers to arrest and prosecute those caught looting rail infrastructure. “Cable theft is in a league of its own. Now that we can appoint our own peace officers and pursue cases through the courts, we should have some relief from this issue.”
Electricity is another topic of contention for the industry that was raised at the Jo’burg Indaba. The country is undergoing power cuts of up to 10 hours a day, with little sign of this improving soon. Andre de Ruyter, the embattled CEO of Eskom, the national electricity provider, said the utility was struggling with rampant corruption, as well as an aging fleet of coal stations prone to break downs. He said in previous years Eskom “pushed the needle into the red” keeping plants running at maximum capacity, while withholding vital maintenance.
Since becoming CEO two years ago, de Ruyter has re-implemented maintenance schedules. Hundreds of employees have either been fired or resigned after lifestyle audits were introduced for Eskom managers. Debt has been whittled down from $30 billion to $25 billion but the company continues to lose money because it cannot set its own electricity prices. These are set by an independent body that has consistently denied Eskom’s market-related requests.
Meanwhile, the government has relented its opposition to private generation, and will allow companies to produce up to 100 MW. “There’s a pipeline of 6 GW of new capacity that will come onto the grid in the next 18 months. This shows what can happen when capital is allowed to be allocated efficiently.”
Gold Fields, for example has completed a 50-MW solar plant at its South Deep gold mine east of Johannesburg. Other miners are doing something similar, adding electricity generating capacity, most of it renewable. On the subject of renewables, de Ruyter said Eskom was committed to transitioning away from coal that now produced more than 90% of the country’s electricity. Given the age of the fleet dating back to the 1970s, most were reaching the end of their lifespans, de Ruyter said. “Eskom’s plants will shut down over the next 10-15 years. If they don’t have a planned shutdown, they will shut themselves.”
Many in the country, including the mines minister Gwede Mantashe, wanted to replace the fleet with new coal burning capacity. De Ruyter, who is usually regarded as a coal guy said however that the shift to renewables was inevitable. South Africa’s major trading partners such as the EU were beginning to subject imports to carbon taxes.
Most of what South Africa exported was minerals and agricultural products. “About 46% of our exports could be subject to carbon customs taxes, because the electricity used in their production is from carbon-intensive sources. We here can rail against the north and their decisions in this regard, but it’s a fact of life, we might as well get ready for it.”