South Africa kissing billions goodbye due to Eskom, Transnet failures 

South Africa is losing billions of rands in economic output due to structural constraints, such as load-shedding and logistical inefficiencies, and a cumbersome regulatory environment. 

This is feedback from Anglo American CEO Duncan Wanblad, who spoke at the Johannesburg Mining Indaba last week. 

Wanblad said SA held “extraordinary untapped potential”, but challenges such as load-shedding and logistics bottlenecks affected “the profitability and sustainability of our business”. 

These issues also prevent investment in expanding output, particularly from mining companies, as there is uncertainty regarding the country’s economic future. 

Another factor resulting in increased uncertainty is the cumbersome regulatory environment for businesses in South Africa. 

“We will never know the amount of investment that companies within and outside SA are choosing not to make in SA as a result of our very real challenges,” Wanblad said. 

Anglo American hasn’t prioritised exploration in SA for many years because it has been prioritising more accommodative regulatory environments.

“We also have to structurally look at how the system is set up for exploration in South Africa. I don’t think exploration in SA is in any way incentivised. For exploration to occur, SA would need to set up an environment that was more accommodative of a multiyear investment,” Wanblad added. 

The Fraser Institute’s Annual Survey of Mining Companies for 2022 ranked South Africa among the bottom ten global mining jurisdictions.

The Institute also ranked South Africa 57th out of 62 countries in its Investment Attractiveness Index. In 2018, the country ranked 36, highlighting its precipitous decline.

As a result of the deteriorating operating environment, mining companies have begun cutting jobs as some of their operations have become unprofitable. 

Anglo American has begun cutting jobs at its head office in South Africa, following reports of other mining giants issuing retrenchment notices as Transnet’s deteriorating performance weighs on their operations.

The focus will be on corporate positions after the company split its business into two regional divisions earlier this year, one covering the Americas and Africa and the other Australia.

The National Union of Mineworkers (NUM) said that 181 notices were sent to Anglo American’s Kumba Iron Ore unit staff warning they could lose their jobs.

An Anglo American spokesman confirmed that the notices had been sent out in South Africa, stressing that it is a global process.

Anglo American’s job cuts follow those of fellow global mining giant Glencore, which launched a retrenchment process last month at one of its coal operations due to an inability to transport coal for export and declining coal prices.

Global commodity trading giant Glencore has begun a retrenchment process at its iMpunzi coal complex in Mpumalanga, which has 1,138 permanent employees.

The general manager of iMpunzi, Hlayiseka Chauke, said Transnet Freight Rail’s poor performance was the primary consideration behind the retrenchment process.

Transnet’s performance has been poor since the beginning of 2021, with export volumes railed to the Richards Bay Coal Terminal dropping from as high as 80 million tonnes to about 50 million tonnes in 2022.

In response, many miners chose to truck coal to Maputo, Durban, and Richards Bay. However, this has become unsustainable following a decrease in the price of coal to an average of $100 per ton in 2023 from $200 per ton in 2022.

“This directly impacts iMpunzi Complex in that there are insufficient trains available to move all the export product to the port, and trucking has become economically unsustainable due to lower prices,” Chauke said.

iMpunzi has an annual capacity of 10.3 million tonnes but can only transport 6 million tonnes via rail for export. Chauke said this is unsustainable.