Coal miners have begun issuing retrenchment notices to their staff, with analysts warning that of the 93,000 people who work in the coal sector, up to 35,000 could be retrenched due to the collapse of Transnet.
Coal miner Seritit Power told Business Times that it had issued a Section 189 retrenchment process at its Klipspruit colliery, affecting 605 workers.
The company bemoaned its inability to transport coal by rail to South African ports for export, hampering the production at its mines.
“Stockpiles at our export mines remain high while stockpiles at Richards Bay Coal Terminal remain low due to persistently low export coal railings to port,” it said.
Seriti’s chief people officer, Ndumi Khoza, said that despite efforts to cut costs over the past five years, the colliery is not commercially viable and can become a financial risk to Seriti Group.
“If no action is taken, Klipspruit will lose between R657 million and R949 million in the 2024 financial year alone, which puts the whole group at a huge business risk.”
Brendon Hubbard, senior fund manager at ClucasGray Investment Management, said mining companies cannot keep mining volumes at the same level if they can’t sell their coal.
Hubbard said of the 93,000 people who work in the coal sector, between 25,000 and 35,000 could be retrenched.
Mining companies have previously warned trade unions of possible job losses as they cannot get their commodities to market due to Transnet’s deteriorating rail infrastructure.
National Union of Mineworkers representative Thapelo Malekutu said that unions have already been informed about retrenchment processes from mining companies.
Despite unions’ best efforts, job losses are unavoidable as Transnet’s decline is accelerating and showing no signs of recovery.
Malekutu acknowledged that miners could not get their commodities to market in a cost-effective manner.
He noted that Richards Bay Coal Terminal is operating at around 50% of its capacity of 91 million tonnes. The volume exported is expected to be below 50 million tonnes in 2023.
More broadly, freight transported on South African railways has decreased from 230 million tonnes in 2017 to 179 million tonnes in 2022.
Mining companies estimated that they lost R150 billion in revenue last year from Transnet’s inefficiencies.
In the past, mining companies have been able to cope with Transnet’s poor performance as commodity prices were high enough to turn a profit despite exporting less.
However, the price of commodities, particularly coal, has decreased markedly in the last year, making the situation unsustainable for mining companies.
Malekutu complained about the lack of urgency the matter was receiving from the government, especially Transnet.
“They always have plans for everything, but implementation and urgency are always a problem.”