South Africa’s freight rail volumes plummet – now lower than 15 years ago

South Africa’s freight rail volumes have plummeted over the last five years and are now much lower than in 2008.

Sarah Truen, an independent regulatory economist with expertise in the South African rail sector, said South Africa’s rail freight sector is facing a crisis of operational efficiency.

In July 2023, she said that in the bulk mineral corridors, reduced rail capacity prevented South Africa from benefiting from mineral price booms.

“The general freight rail business is experiencing massive operational disruptions, and the shift in freight transportation to the road is causing substantial infrastructure damage,” she said.

Truen’s concerns are nothing new. Mining companies have long requested interventions to improve Transnet’s performance.

The deterioration of Transnet’s rail corridors has forced miners to transport their minerals to South Africa’s ports via trucks.

The Reserve Bank estimated that transporting coal to Richards Bay via rail costs around $11 per tonne, while trucking costs companies roughly $70 per ton.

Despite the huge price difference, Transnet’s poor rail operations leave miners with no choice but to transport their products using trucks.

Many miners use trucks to transport their produce to Maputo in Mozambique to avoid using Transnet’s rail infrastructure and delays at South African ports.

This has put South Africa’s mining industry, which contributes over R200 billion to GDP, at risk.

In its interim results presentation, Kumba Iron Ore said it had lost R6 billion from Transnet inefficiencies alone in the first six months of the year.

It was also forced to cut its iron production in South Africa over the next three years to ensure its output does not exceed Transnet’s declining capacity to transport the mineral via rail for export.

Kumba’s iron ore stockpiles had grown to 9 million tons by September due to the rail bottlenecks, resulting in the company running out of space to store the mineral.

It said it now expects to end 2023 with production of between 35 and 36 million tons, down from the previous forecast of 35 to 37 million tons.

Kumba CEO Mpumi Zikhalala said ongoing logistics constraints have continued to place significant pressure on their value chain.

The persistent logistics problems have resulted in a 15% decrease in iron ore railed to port since 2019, Kumba said.

Kumba’s parent company, Anglo American, said they would ramp up production once the transport capacity was available.

These are not isolated events, which means Transnet’s troubles and lower freight rail volumes are hurting mining companies and the South African economy.

The chart below shows the rise and fall of South African freight rail volumes over the last fifteen years.