Commodity boom untapped as South Africa fights rail woes

JOHANNESBURG: South Africa is missing out on some of the riches on offer from the commodities boom as a rail network beset by problems hobbles its exports.

While coal prices recently soared to a record and iron ore is historically high, miners are being forced to stockpile supplies as state-owned Transnet SOC Ltd’s rail network buckles under issues from cable theft to breakdowns, compounded by years of corruption.

Last year alone, more than US$2bil (RM8.42bil) in potential coal, iron ore and chrome exports were lost, an industry group said.

Transnet’s lines are critical for moving bulk commodities – which have rallied further amid the war in Ukraine – from mines to ports.

As lost earnings mount for miners, executives are becoming more frustrated by rail failures. It’s become such a headache that South Africa’s top thermal coal shipper, Thungela Resources Ltd, is weighing buying overseas assets to limit its local exposure.

“South Africa is losing money, we are losing money as an industry and we as a company are losing money,” Thungela chief executive officer July Ndlovu said. “It doesn’t make sense for us to concentrate our risk on exactly the same infrastructure that has cost us as much.”

Transnet’s 31,000-km network includes a route taking high-grade iron ore from Kumba Iron Ore Ltd’s giant Sishen pit in the Northern Cape to the west coast, and one from Mpumalanga’s vast coal fields to the east coast.

Companies using it also include Exxaro Resources Ltd and Glencore Plc.

The network is being increasingly targetted by thieves taking cables which disrupts operations. It has suffered from locomotive shortages and has even suspected sabotage of infrastructure.

Frequent locusts infestations that affect traction on the iron ore line and bad weather also add to the list of problems. — Bloomberg