/ 6 February 2023

Minerals Council ‘encouraged’ by talks with Transnet after leaked letter

Transnet

The Minerals Council South Africa is “encouraged” by recent discussions with Transnet about enduring logistics constraints, which caused an estimated 6% decline in mining production activity in 2022.

Speaking at a media briefing on the sidelines of the 2023 Mining Indaba, Minerals Council chief executive Roger Baxter underlined that the mining industry employer organisation is encouraged by discussions with the Transnet board. “And we are hoping that they will deliver some very specific results in stabilising rail performance in the short term.”

Tensions between the Minerals Council and Transnet’s management recently made headlines. This is after a letter by Minerals Council president Nolitha Fakude to Transnet chairperson Popo Molefe was leaked. 

In the letter, Fakude called for urgent action to arrest Transnet’s decline. Included in these interventions was the Mineral Council’s call for the removal of Transnet chief executive Portia Derby

The council has said it would not comment on the contents of the letter.

Baxter later added: “We have certainly given the Transnet management team a lot of time over the last two years to work on the various challenges that we have brought to their attention. Yes, there was the unfortunate leaking of a particular letter, which was a confidential letter to their board focused on a number of issues around Transnet.”

Subsequent to the letter, Baxter said, the Minerals Council held talks with Transnet’s board, led by Fakude and Molefe.

“A very significant engagement process was undertaken. A structure was set up to focus on what we wanted to achieve. That focus was on how we improve and stabilise in the short term,” he added. 

Although the Minerals Council is encouraged by the recent developments, “it is still early days”, Baxter said. “We need to see more progress being made.”

According to the council’s statistics on the state of South Africa’s mining industry, production will fall by about 6% in 2022 compared to the year before. 

“The constraints around transport, logistics and border posts remain, and they are increasingly hampering mineral export volumes,” Minerals Council chief economist Henk Langenhoven said.

The value of mining production hit R1.1 trillion for the first time during 2021 and grew further to R1.18 trillion in 2022. But the volume of mining sector production is now on average below the pre-pandemic levels as a result of structural constraints.

While export values grew to R878 billion in 2022 from R856 billion, according to the Minerals Council this was purely because of commodity prices improving by 70% year-on-year. Export volumes were stagnant, growing by just 0.2 % in the 12 months to end October 2022 versus the same period in 2021.

Baxter noted that logistics constraints have cost the industry R51-billion in exports. The costs of other structural constraints, such as those the industry has endured as a result of the ongoing energy crisis, are more difficult to tally, Baxter said.

Troublingly, according to the Minerals Council’s presentation, higher commodity prices have not resulted in more fixed investment in the industry. This is because of “the structural domestic constraints and uncertainty over the durability of elevated commodity prices”.