South Africa’s coal exports to Europe have plunged to their lowest point since 1992, signalling a growing risk to the country’s logistics and supply chain infrastructure.
This is the view of Riskonet Africa’s risk principal, Volker von Widdern, who said 2023 saw a 57% decrease in annual coal shipments due to persistent disruptions in rail transport.
“The decline we’re observing is unprecedented and paints a stark picture of the challenges ahead,” he said.
“Rail disruptions have severely restricted our capacity to export coal, particularly impacting the Richards Bay Coal Terminal (RBCT) – Africa’s biggest facility of its kind.”
“This situation is more than an economic setback – it’s a critical reminder of the vulnerabilities in our supply chain and the urgent need for robust, sustainable solutions.”
Von Widdern said over a third of South Africa’s coal exports are now being routed through road carriage terminals, which export 26 metric tons but face various capacity constraints.
“This shift from rail to road transport is not only incurring additional costs but is also causing significant environmental damage to roads and communities,” he said.
“Despite the necessity of the road terminal in supporting the coal miners’ results and leveraging the recent coal boom, this mode of transport raises critical concerns regarding its alignment with the sector’s stated commitment to Environmental, Social, and Governance (ESG) principles and overall sustainability.”
Von Widdern said the true economic cost of Trasnent’s substantial decline in capacity is not being adequately measured.
“The broader impacts on infrastructure, communities, and the environment due to the increased reliance on road haulage are neither quantified nor accounted for, raising questions about the long-term viability and responsibility of this alternative service.”
The continued deterioration of Transnet’s infrastructure and performance threatens the entire South African economy, which is reliant on the utility to facilitate 68% of its GDP.
BDO partner Siyabonga Mthembu stated in an interview with 702 last year that the crisis at Transnet is worse than that of Eskom.
According to Mthembu, the issues plaguing Transnet are similar to those faced by Eskom, including falling capacity, deferred maintenance, theft, and management issues.
South Africa is heavily reliant on efficient logistics, as imports and exports account for 68% of the country’s GDP.
The economy is unique in that most of its GDP is centred on Gauteng, making it function as a landlocked country. The production in Gauteng needs to be transported to other provinces and the coast for export.
If the logistics system fails, then the economy based on the movement of goods will collapse. Mthembu warns that no one will want to import or export goods, leading to a significant loss of revenue.
Mthembu believes that estimates that the country is losing R1 billion a day due to Transnet’s collapse are conservative.
He said the figure does not include the potential disinvestment from local and international companies, which is difficult to quantify.
Mthembu further explained that international companies will not invest in South Africa if there is a risk that they will not be able to export their products or transport them to the end consumer.
This situation may lead to a significant loss of potential investment.
Von Widdern believes addressing the capacity issues of Transnet coal haulage remains a paramount concern for the coal mining industry and RBCT.
“With risk tolerance levels possibly being exceeded, there’s an urgent need for new strategic and long-term solutions, potentially involving the coal miners and the private sector assuming operational responsibilities for the coal line through various Public-Private Partnership and Build-Operate-Transfer models,” he said.
He added that the crisis raises alarm bells about the resilience and reliability of South Africa’s infrastructure, and industry stakeholders and policymakers need to take swift and decisive action.
“The ramifications of these rail disruptions extend beyond the coal industry,” he warned.
“They underscore a systemic issue within our national infrastructure, highlighting the need for comprehensive risk assessments, infrastructural investments, and strategic planning to fortify our supply chains against such vulnerabilities.”