Transnet paid one company R940 million for poor performance

Transnet paid Kumba Iron Ore R942 million in penalties for logistics underperformance in the miner’s 2025 interim results.

Kumba Iron Ore is the largest iron ore producer in Africa and is majority owned by mining giant Anglo American.

Kumba released its interim results for the six months ended 30 June 2025 on Tuesday, 29 July 2025. These results showed a mixed performance for the miner, which faced lower iron ore market prices in the six-month period.

The company’s revenue was down 4%, largely driven by a 6% reduction in the average realised free-on-board iron ore export price to $91/wmt and a 2% stronger foreign exchange. 

However, Kumba kept an eye on costs over the period, which allowed it to realise R661 million of savings. Consequently, Kumba’s expenses were 1% lower.

“These savings, combined with an increase in deferred stripping costs capitalised, a lower freight cost and mineral royalties, offset the cost of inflation, drawdown of work in progress stockpiles, higher depreciation and distribution costs,” the company said.

This allowed the company’s headline earnings per share to stay relatively flat at R22.26 per share, compared to R22.27 in the first half of its 2024 financial year.

Kumba’s EBITDA was also 3% higher compared to H1 2024, growing from R15.58 billion to R15.99 billion.

In its interim results report, the company explained that its earnings for this six-month period were further boosted by penalty income from Transnet for “logistics underperformance”.

The report revealed that Transnet had paid Kumba R942 million in penalty income for its logistics underperformance in the period.

The impact of Transnet’s struggles on the logistics sectors and miners, in particular, has been well-documented.

Kumba has been vocal about this impact on its operations over the past few years. 

In 2023, the company reported losing R6 billion from rail underperformance in the first six months of its 2023 financial year. This is in addition to a R10 billion loss in 2022. 

The miner also announced in December 2023 that it will 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.

Due to this significant impact on its operations, Kumba has been working closely with Transnet and other industry stakeholders to improve the performance of the country’s logistics sector.

Progress made

In its H1 2025 results, Kumba CEO Mpumi Zikalala said the company values its collaborative partnership with the government, the Ore Users Forum (OUF) and Transnet.

“The stabilisation of Transnet’s logistics performance driven by the Ore Corridor Restoration (OCR) programme is pleasing, and the finalisation of the Mutual Cooperation Agreement (MCA) to expedite critical maintenance work further strengthens our partnership,” Zikalala said. 

“We are also encouraged by the pace of logistics reform through the potential Private Sector Partnership process currently undertaken by the Department of Transport.” 

“At the end of May, along with the OUF, Kumba made a submission to the government in response to a Request for Information, and we await the Request for Proposal process later in the year.”

She explained that Kumba’s advocacy of logistics reform through ongoing collaborative efforts with Transnet, government and industry peers has contributed to the stabilisation of the logistics network and progress toward potential Private Sector Partnership.

This refers to Transnet’s plans to allow third-party operators to use its network, which is expected to help ensure that the utility is in a healthy and sustainable financial position.

While the full realisation of this plan is expected to take some time, Kumba said it is already seeing progress in Transnet’s reform.

The company reported that its ore railed to Saldanha Bay port improved by 4% to 18.9 Mt (H1 2024: 18.1 Mt) despite two derailments in the second quarter. 

“This improvement demonstrates the progress made through the OCR programme and the benefit of the OUF working more closely with the Transnet operational teams to address the maintenance requirements identified in the independent technical assessment,” the miner said.

Kumba said the recovery of the logistics network is critical to the health of the value chain.

“Overall, the collaborative partnership between the OUF and Transnet on the ore corridor restoration programme is starting to deliver positive outcomes in terms of logistics performance,” it said.