An iron will to get SA back on the rails
Afrimat CEO urges government to let private sector take major role in running logistics infrastructure
Andries van Heerden, CEO of R6.8bn diversified industrial group Afrimat, says continuing ideological resistance to meaningful private sector involvement in running freight lines and ports is a disaster for South Africa.
“As a country we’re exposed to Transnet. If you look at how important bulk commodity exports are for our country, it’s a disaster,” he says. “If you look at our ports and the chaos they’ve been in, it’s a huge risk to our economy. We should as a country be putting our best resources into trying to fix the lines and harbours.”
Afrimat, started by Van Heerden 16 years ago, mines iron ore and anthracite for local and international markets, making it heavily reliant on Transnet for export and domestic lines.
Right now the company is counting the cost of Transnet’s two-week strike. “We lost two weeks of sales because of Transnet’s underperformance. Not a single train was loaded for two weeks.”
But Transnet has cost Afrimat hundreds of millions over the years.
The 860km Sishen-Saldanha export line, which carries iron ore — including Afrimat’s — from the Northern Cape to the Western Cape port for export to China, was beginning to get “a little better” until the strike. But the line for local iron ore deliveries has been so bad that one of Van Heerden’s biggest clients, ArcelorMittal, the world’s second-largest steel producer, declared force majeure last year because of Afrimat’s rail-related delivery problems.
Afrimat’s Jenkins mine in the Northern Cape could supply 100,000t a month but could not deliver more than 60,000t to Arcelor because of Transnet’s limitations.
“Arcelor’s supply chain has been battered by this, which hurt us badly even before the strike. Because of Transnet’s underperformance we’ve never sold more than 60% of the contractually agreed amount to them.”
In May, Afrimat could not get a single tonne to Arcelor. In October, the month of the strike, it sold 25,000t to the steelmaker. “That’s pretty drastic,” he says.
The domestic line Afrimat depends on to service its clients is “a total disaster, with cable theft and a lack of locomotives and I don’t know what all problems”, Van Heerden says.
“We’re not getting close to what we’re supposed to be supplying to our domestic clients, so that is a big problem for us. As a country we are battling to get our rail system back to the capacity of the 1970s, when these lines were built, and consistently operating at the levels they were designed for. That was when they were being properly managed.”
He says Australia and Canada, where bulk commodities are moved by rail, have demonstrated what a difference the use of modern technology can make.
“Even our best-performing SishenSaldanha line could easily carry significantly more than it is if we had more modern technology. We’re not even close to that level, and that’s because of a lack of vision and the drive to improve.”
If the mining industry was allowed to play a bigger role in running freight lines South Africa could “easily” be exporting “much higher” volumes, he says.
“The design capacity on the SishenSaldanha line is 60Mt [a year] but we could easily get to 90Mt if we modernised. And whatever was invested to do that would quickly pay for itself.”
In Australia, private iron ore miner Fortescue is allowed to build and operate its own rail, and it is “highly, highly efficient”.
In South Africa, ideology prevents local lines such as the Sishen-Saldanha line being opened up to anywhere near that kind of private sector involvement, posing a major risk to economic growth.
“Another major risk is that we don’t have any refineries. They’re all down and there’s been no investment in modern, technologically friendly refining capacity. So we have to import every single litre of diesel and petrol, and that makes us 100% reliant on Transnet again to get the stuff through our harbours and into the country.
“From a strategic point of view that calls for serious action to get the private sector involved.”
There’d be no shortage of capital, he says. “Investment would make such a lot of sense from a business perspective that getting the necessary capital would be very possible.”
The Minerals Council South Africa, including Afrimat, has been working “very hard behind the scenes to try and get that right”, Van Heerden says.
“It would be great if government was a little bit more receptive to that and if the executive leadership of state-owned enterprises were more receptive.
“There’s a lot of potential in the private sector, mining companies, agricultural companies, people with real operational expertise that have a serious vested interest in making the logistics systems work.”
The consequences of not making proper use of their skills are being catastrophically demonstrated all the time, he says.
“On domestic lines the lawlessness, cable theft and things like that, is getting completely out of hand and is really hurting us.
“You can just look at what happened to Highveld Steel and what is happening to ArcelorMittal and many others. We are deindustrialising this country, and that is unsustainable. We need to reindustrialise it, we need to get our mining industry to really perform. And for that we need electricity, we need logistics.”
The latest Arcelor construction index shows that the rollout of government infrastructure projects is happening “at a snail’s pace”, which is another “disaster” for the country, he says.
There is a lot of talk but little action. “You’ve got all these people sitting on committees who are either academics or people with a legal or political background. But you don’t see many hardcore civil or electrical engineers who have the right experience.”
In spite of everything, Van Heerden remains a glass half-full rather than halfempty man. The greatest risk to South
Africa is people giving up hope, he says.
“We as part of the mining industry are speaking at a ministerial level and a senior executive level with Transnet and we are frustrated, that is true. But we can’t give up hope, otherwise everything really is going to go to pieces.”
You’ve got people sitting on committees who are academics or have a legal or political background. But you don’t see many hardcore civil or electrical engineers with the right experience