Minerals Council, Transnet back on track

The Minerals Council SA and Transnet said they are committed to co-operation after the poor performance of the state-owned rail and ports operator prompted the council to call for its top executives to quit.

According to a report by Fin24, members of the council penned a confidential letter on December 4 to Transnet chair Popo Molefe calling for the resignations of Transnet CEO Portia Derby and Transnet Freight Rail CEO Siza Mzimela.

“Members have lost confidence in the existing Transnet leadership team, and we do not think they have the capability to turn the current crisis situation around,” the letter states.

The council had previously blamed Transnet’s poor performance for revenue losses of R50bn — a result of its members being unable to transport more bulk commodities including coal, iron ore, manganese and chrome last year. It said a further R35bn in losses were incurred in 2021 when prices peaked.

 “The bulk commodity mining companies that are members of the Minerals Council are demanding urgent action on this crisis, as it is now posing an existential crisis for Transnet and for the mining companies,” the letter reads. 

However, on December 19 the council and Transnet announced they had agreed to collaborate on long-standing problems at the logistics company and to maximise bulk export potential.

Unwarranted criticism

Some commentators said the council’s call for the resignations was unwarranted, given Transnet’s woes.

Vuslat Bayoglu, MD at investment company Menar, said Transnet was going through tough times mainly because of cable theft and the lack of rolling stock. 

“The CEO of Transnet is trying her best to communicate with the industry to understand and work together to deal with the challenges. It would have been better to show the industry’s support and confidence for the CEO of Transnet in these difficult times.”

The Black Business Council (BBC) accused the council of being anti-transformation, saying Transnet had recently announced steps to open capacity allocation for emerging manganese miners, thus aiding the transformation of the economy in general, and the mining sector in particular.

 “The BBC is convinced Minerals Council SA’s calls for the Transnet CEO and rail chief to be axed is fuelled by the Mineral Council’s anti transformation stance,” it said in a statement. 

However, the council and Transnet appear to have put their differences aside with the December 19 announcement of a partnership. They have  agreed to stabilise the group’s  infrastructure and establish an oversight panel, a recovery steering committee and channel optimisation teams for each of the major commodities — coal, iron ore, manganese and chrome.

The CEO of Transnet is trying her best to communicate with the industry to understand and work together to deal with the challenges. It would have been better to show the industry’s support and confidence for the CEO of Transnet in these difficult times

Solid relationship

The council and Transnet declined to comment on the letter this week, but said their partnership remained solid.

Transnet said it was recovering from “an intensely challenging period” and in addition to rampant cable theft and infrastructure vandalism experienced in recent years, the impact of state capture had been extremely damaging. 

Those problems had been worsened by the unavailability of locomotives and spare parts, it added.

“Transnet has a strong working relationship with the Minerals Council, and is in regular discussion with the mining sector and other customers around suggestions for ongoing improvements to our service,” Transnet said in a statement. 

Where there are challenges, these are addressed jointly, in the interests of all parties. We are confident that this will soon begin to yield the desired results.”

A  council spokesperson said it was working in closely with Transnet’s board and management to urgently resolve deep-seated problems and constraints in rail and port logistics to the benefit of bulk commodity companies, Transnet and the fiscus. 

“The Minerals Council and Transnet have established joint teams to address constraints on bulk commodity export channels. The Minerals Council and its members are committed to finding urgent, pragmatic and lasting solutions to the problems curtailing mineral exports,” the spokesperson added

Infrastructure constraints have affected bulk commodity companies such as Exxaro Resources, Tharisa Minerals, Thungela Resources, and Kumba Iron Ore.

Resilient resources

Speaking on the sidelines of a World Economic Forum breakfast on Thursday, Exxaro Resources CEO Nombasa Tsengwa told Business Times that despite logistics challenges, mining companies were resilient.

“Year in and year out, we do not stand up and say we have given up and failed, we stand up and show good results. Yes, they could be better, but the effort people in our business are putting in to mitigate these challenges is telling us that there is no problem that is not solvable. I am convinced that it cannot get worse than it is,” Tsengwa said

Collaboration at board level between the Minerals Council and Transnet was taking the mining industry forward, Tsengwa added.

“Forget about what is leaking in the news, and the misunderstanding of what we see with the executives at Transnet,” she said. “For me it is not about taking people out of jobs, it is about ‘are you listening to us and are you taking us seriously as a stakeholder’. I believe the partnership that has unfolded at the highest level has given us much hope.”

Last week Tebello Chabana, the council’s senior executive for public affairs and transformation, told Business Times the newly established partnership with Transnet would not be confined to talk shops. 

“We are not just setting up parallel structures, what we want is delivery. So early in the year we are going to be focused on setting up key performance indicators for our collaborative effort,” Chabana said.

Swings and roundabouts for mining sector

The reopening of the Chinese economy is expected to boost demand for metals following strict Covid lockdowns, but analysts and industry players fear load-shedding will worsen this year and, combined with logistics problems, place the sector under greater pressure.

Eskom this week implemented stage 6 load-shedding, underscoring the prospect of continued power insecurity this year following peak load-shedding just four months ago in September. 

State-owned logistics firm Transnet has also been hamstrung by rail and port constraints.  In 2021 large-scale cable theft, vandalism, unavailability of locomotive and spare parts, and infrastructure bottlenecks cost mining houses billions in lost export revenue.

FNB Wealth & Investments equity research analyst Makhosi Nyamela said this week South Africa's electricity crisis would be worse this year in terms of breakdowns at Eskom’s coal power plants,  with harsh consequences for underground mining and smelters.

Based on the production guidance from companies, these expected breakdowns had been factored into their calculations — but perhaps by not enough. “Even though many companies have revised their production guidance downwards, you could find that there could be further downgrades,”  Nyamela said.

Eskom has load-curtailment arrangements with mining companies to reduce power use at peak periods, and during last year’s intensive load-shedding the arrangements cut output at platinum group metals (PGM) producers. 

Last month Anglo American Platinum CEO Natascha Viljoen was quoted as saying load-curtailment last year had been “more than we have flexibility in the system for, and we have seen more impact on the operations”.