Transnet operations dealing multibillion-rand economic blow
Coal and ore exporters are unable to take advantage of commodities boom
TRANSNET Freight Rail (TFR) has lost more than 15 million tons of freight volumes in the year ending March 31, after declaring force majeure due to irregular locomotive acquisition, maintenance problems and massive cable theft on its coal line.
This will be a blow for South Africa’s biggest coal exporters, who have already lost billions of rand in export opportunities due to Transnet’s poor rail performance.
TFR on Friday said its performance for the year was affected primarily by a reduction in the number of locomotives due to maintenance problems.
In the 2021/22 financial year, TFR only had 1 656 locomotives, a 25 percent decline from 2 215 locomotives, which significantly reduced its ability to move goods.
Transnet said getting spare parts for certain locomotives had been jeopardised by the protracted application to review the acquisition of 1064 locomotives, which had affected the reliability and availability of locomotives.
Although the review application and preservation regarding the 1 064 locomotive acquisition was ongoing, Transnet said it was hopeful these issues would be resolved soon.
“Transnet is progressing with just and equitable settlement negotiations with the relevant Original Equipment Manufacturers that may draw protracted litigation to a close and enable the rehabilitation of locomotives and security of supply,” it said.
“About 15.7 million tons of freight volumes have been lost in the current financial year as a direct consequence of locomotive unavailability on the North Corridor alone.”
Last month, Transnet warned coal export parties that persistent legal woes and massive theft of copper cables would impede its ability to fully meet its contractual obligations for at least the next six months.
Transnet’s difficulties to meet its targeted rail capacity resulted in bulk commodity miners of iron ore, coal and chrome, the three biggest commodities last year, losing revenue of R35bn.
For coal alone, the industry lost R16bn out of the R35bn as coal export volumes for 2021 fell to 58.2m tons, from 70m tons of coal exported in 2020.
Transnet’s rail difficulties could rob the fiscus of billions of rand in corporate taxes as exporters fail to take advantage of the commodities boom.
Meanwhile, Transnet said that security incidents, mainly relating to ongoing cable theft and infrastructure vandalism, also contributed to performance challenges for TFR.
It said that more than 1000 kilometres of cable have been stolen from its rail operations, though some progress had been made in curbing fuel theft from the petroleum pipeline.
“This has resulted in more than R1.6bn being spent on security and about R400 m on replacing stolen cables, with operational disruptions causing lost revenue estimated at R1.9bn in TFR alone,” it said.
“To mitigate against the impact of security incidents, Transnet has entered into various collaborative initiatives with customers on the most affected corridors.
“The increased deployment of security resources has resulted in fewer incidents over the past few months.”
Despite these operation challenges, Transnet said it was continuously optimising its operational resources to improve its financial performance.
Transnet expects to report a 1.6 percent increase in revenue to R68.3bn, with earnings before interest, taxation, depreciation and amortisation up by 22.1 percent to R23.8bn.