Transnet made a significant intervention in the transformation of South Africa’s mining landscape this week with its announcement of measures to give emerging miners greater access to its facilities.
Transnet has an obligation to facilitate transformation and reduce the cost of doing business to help the industry be globally competitive.
A rigorous consultation process was undertaken to understand the challenges faced by emerging miners. They cited, among other issues, financial constraints, the ability to transition from emerging to major status and limited access to rail.
Through this process, Transnet is ensuring emerging companies, particularly those mining manganese, will have a better chance of becoming the mining giants of tomorrow, ensuring black-owned and developed businesses take their much-overdue place on the global commodities stage.
The criteria for emerging miners has been cleared and agreed upon: they must have valid mining rights, ownership of the commodity to be exported, be involved in mining activity and have access to a rail-loading facility.
The interventions signal a significant shift in how we do business with emerging miners: new contracting and capacity allocations have been put in place, the allocation ratio has been rebased to ensure more access to facilities for them and a number of steps have been introduced to make it easier for emerging miners to do business, including new credit-management procedures. Other step changes include improving access to infrastructure, such as loading facilities and ensuring transparency to encourage fairness and good governance.
As such, Transnet aims to increase the number of emerging mining companies that have access to rail and port capacity from four to 11 by the beginning of the next financial year.
The four existing emerging miners are beneficiaries of a deliberate and focused enablement programme that was introduced more than 10 years ago, a first step in easing access for emerging miners. At the time, there were only two players in the manganese sector, moving 5Mt of export manganese a year through Gqeberha.
Transnet can’t allow history to repeat itself, as occurred in 2016, especially given part of our mandate as a state-owned company is to support the transformation of the industries in which we operate and bolster inclusive economic growth
Over the years, Transnet Freight Rail expanded its capacity to 16Mt a year, enabling it to introduce eight emerging miners onto the rail network.
Through Transnet’s support, four of the eight grew to become notable players in the manganese markets and migrated to mining-major status.
Now it is time for a second intervention — to increase the economic opportunities of the remaining four emerging miners and open up space for an additional seven.
The former companies utilise 2Mt a year of Transnet’s rail capacity, or 12% of overall rail throughput. The remaining 88% — or 14Mt a year — is allocated to six major mining companies.
According to the emerging miners, an additional 7Mt are being moved by road and they would like to switch these loads to rail. Thus, Transnet’s intervention to open up its facilities — rail and port — to ensure this can happen. This will also bring much-needed relief to our road network, especially in the Nelson Mandela Bay municipality where trucks have damaged the road infrastructure.
The emerging players are on the back foot in the commodity markets as their overall cost is exponentially higher than that incurred by those who use rail, owing to the expense of trucking by road. They are also more exposed to any collapse in commodity prices, as happened in 2016, when the price of manganese dropped from $7 per dry metric ton unit to an unsustainably low $1.52.
Back then, there was a lot of pressure on Transnet to help emerging miners because their survival was dependent on access to rail. At the time, Transnet enabled those limited by lack of capital to invest in rail-loading facilities, including one in Lohathla, which serves the four emerging miners as a common-user rail-loading facility.
Transnet can’t allow history to repeat itself if there is another price collapse like that in 2016, especially given that part of our mandate as a state-owned company is to support the transformation of the industries in which we operate and bolster inclusive economic growth.
Transnet is expanding its capacity through the ports of Gqeberha and Saldanha from a combined total of 16Mt a year to 22Mt. Construction for the expansion project will start in 2024 and capacity will become available on a scalable basis during the construction phase, with full commissioning envisaged by 2027.
In the spirit of inclusivity, and once available, this ramped-up capacity will be available for both emerging and major miners in the manganese sector.
Working with both, we look forward to increased success — and increased transformation — in this vital sector of the economy. We must collectively strive to drive an inclusive, thriving and robust economy for the betterment of our country. It is only right that we do.
• Kani is group chief business development officer at Transnet
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