African Mining January 2023 | Page 7

AFRICAN BUZZ •

By the Minerals Council South Africa

If there was a single number at the Joburg Indaba in October 2022 that put into context the consequences of South Africa ’ s logistics nightmare , it was R151-billion .

If the rail network was operating at nameplate capacity , South Africa would earn R151- billion more in revenue from its bulk mineral exports .

To put that number into context , government annual spending on police is R112-billion and law courts and prisons will receive nearly R52-billion in the current financial year , according to the recently released Medium Term Budget Statement .

The total of R164-billion is a fair bit more than the R151-billion being left on the table by not efficiently and effectively transporting bulk minerals like iron ore , coal , chrome , ferrochrome and manganese , but it does contextualise quite neatly how much the country is forfeiting .

Minerals Council CEO Roger Baxter said at the Joburg Indaba that if actual deliveries were measured against contracted tonnages , the country was losing an annualised R50-billion of undelivered bulk minerals compared to R35-billion last year .

The numbers are overwhelming and disheartening .

Consider what the benefit would be for Transnet ’ s balance sheet if it was able to realise the revenue from an efficient and fully functional rail and port network . Arguably , it would be one of the stateowned entities left off the list of the many which currently need government bailouts .

Transnet was granted R2.9-billion in the Medium Term Budget Statement to restore more than 300 locomotives to service and another R2.9-billion to repair damage in the eThekwini areas in the flooding that wreaked havoc in KwaZulu-Natal during 2022 .

In its 2022 financial statements , Transnet ’ s current liabilities stood at nearly R59-billion ( of which more than R36-billion was debt ) compared to current assets of more than R22-billion , with cash of about R4-billion .

It is paying R10-billion a year in finance costs out of cash flow from operating activities of R17.5-billion .

There are a lot of numbers , but they underscore that Transnet is not in a happy place . Nor is the bulk mining industry .

When Baxter talks of the mining industry and Transnet being joined at the hip , and that if one goes – the other will follow , it is evident in these numbers . Bulk minerals made up 84 % of Transnet Freight Rail ’ s R37-billion of revenue from customer contracts .

Transnet simply cannot exist without the mining industry . Nor will the fiscus easily survive . The two years of Covid-19 and consequent economic slump proved the importance of mining to the country , propping up the fiscus and broader economy , allowing the government to pay a basic income grant with the higher-thanexpected inflow of tax revenue .

With these stark facts , the argument can be solidly made that Transnet is in urgent need of proper , pragmatic private sector participation on the ports and rail infrastructure . While the government has announced tiny and tentative steps on the terms of private-sector participation on rail , which has been roundly derided by potential participants as wholly inadequate and unfeasible , and at certain port container facilities , there is a much bigger , and much more urgent need for greater reforms .

Consider the R151-billion Baxter spoke about if all the rail capacity for bulk mineral exports was fully utilised . That ambition is far beyond Transnet ’ s abilities in terms of its balance sheet to name but one aspect . The state needs to relinquish its grip on infrastructure and encourage private sector participation .

Eskom is undoubtedly in crisis mode , with its continued inability to supply the country ’ s electricity needs throttling the economy and any hopes of job creation . Baxter pointed out at the Joburg Indaba that Transnet is similarly in a crisis and needs urgent attention .

It ’ s as though the Presidency and relevant ministers have not been made aware there is a crisis . The Minerals Council and other business organisations have flagged Transnet ’ s problems . The government needs to find the courage to act and to act decisively for the good of 60 million citizens rather than narrow ideological principles before it ’ s too late .

With these stark facts , the argument can be solidly made that Transnet is in urgent need of proper , pragmatic private sector participation on the ports and rail infrastructure .

The Investing in African Mining Indaba is due to hit Cape Town 6-9 February 2023 . Known as the world ' s largest gathering of the most influential stakeholders in the African mining industry , the indaba is gearing up to deliver a record-breaking event that will facilitate greater investment into African mining .

Investing in African Mining Indaba will bring together ministers , senior government representatives , mining companies , mid and junior miners , investors , professional services as well as mining equipment and service providers , thus offering access to the entire value chain and the most influential players in African mining for four days of high-quality content , deal-making and networking opportunities .

“ Mining Indaba has been a significant platform for Africa ’ s mining industry for almost three decades . It is the only place where the mining community comes together to share perspectives