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South Africa’s Coal and Iron Exporters to Invest Billions in Rail Repairs

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South Africa’s coal and iron-ore exporters, including firms such as Glencore Plc and Anglo American Plc, are gearing up to sign agreements with Transnet SOC Ltd. by next month. These agreements will facilitate investments worth billions of rand to restore the country’s damaged rail infrastructure and boost export capacity.

The collapse of critical freight-rail lines—caused by theft, vandalism, and lack of maintenance—resulted in South Africa’s coal exports plummeting to a 30-year low of 48 million tons in 2023, while iron-ore railings reached a decade low.

Private Sector Collaboration with Transnet

Organizations representing exporters are negotiating the terms of the agreements with Transnet, South Africa’s state-owned logistics company. These pacts will include private capital and expertise to repair the rail lines, which are essential for transporting coal to Richards Bay and iron ore to the Saldanha port.

According to Ian Bird, head of transport and logistics at B4SA (Business for South Africa), restoring the rail infrastructure to near-maximum capacity is crucial. “We are now at a point where something has to be done,” Bird stated.

The Cost of Restoration

Transnet estimates that repairing:

  • The coal line will require R12.9 billion over three years,
  • The iron-ore line will cost about R9 billion, and
  • Repairing all tracks, including those for manganese and container transport, will cost R64.5 billion over five years.

These massive investments aim to reverse the downturn in export volumes, which fell far below Transnet’s targets.

Challenges and Financial Hurdles

Despite modest progress, Transnet Freight Rail has struggled with derailments, vandalism, and theft. While total freight-rail volumes were up 5.3% from the previous year, they were still 7 million tons below the 2024 target of 170 million tons.

Key export goals include:

  • 193 million tons by 2025-26, and
  • 250 million tons by 2029-30, with private investment accounting for one-fifth of this growth.

The Treasury is expected to provide clarity on Transnet’s funding in the upcoming national budget. However, reduced tariffs negotiated by third-party operators mean that projected revenue may fall short of expectations.

Private Sector’s Role in Recovery

Independent technical assessments have been completed for coal and iron-ore lines, with further studies planned for other routes. Private operators will also run trains on state-owned lines starting April 2024, a move the government hopes will attract more investment.

South Africa’s exporters are stepping up to save the country’s rail infrastructure, which is critical for its mining sector. With agreements set to be finalized soon, the collaborative effort between private companies and Transnet could rejuvenate the country’s logistics network and restore export volumes to pre-crisis levels.

As South Africa pushes for greater private sector involvement, the success of these efforts will be pivotal for the country’s economic recovery and international competitiveness.

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