Ports and Transnet Freight Rail inefficiency may have cost R150bn in lost opportunity

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FIFI PETERS: Let’s move on to mining matters because the Minerals Council held its annual general meeting today [31 May]. They represent some of the country’s top miners, and you would’ve heard on the SAfm news bulletin that they spoke about the lost opportunity for the mining sector, an opportunity that cost them around R150 billion last year as a result of not being able to get everything mined from the ground out into the export market because of some of the challenges experienced by the ports and the freight rail lines.

They also today appointed a new CEO – the head of stakeholder relations at Exxaro Resources, Mzila Mthenjane, who is to be the incoming CEO of the Minerals Council of South Africa, succeeding Roger Baxter at the end of June.

We’ve got Tebello Chabana, the senior executive for public affairs and transformation at the Minerals Council on the Market Update for more.

Tebello, thanks so much for your time, as always. Talk to us about the main highlights and perhaps let’s begin with the appointment of the new CEO. Why Mzila?

TEBELLO CHABANA: Let me just give a little background. This was the 133^rd AGM of the Minerals Council. So it has been going for some time, as you can imagine. Just another thing I wanted to point out: if you remember, the Minerals Council clearly represents a large number of the larger mining companies.

We make up about 90% of SA’s production by value, but we also represent quite a large number of mid-year and smaller companies through our association.

We have essentially in excess of a thousand companies that are supported by the Minerals Council. I just wanted to put that first.

Also, before we [go further], I think it’s important to talk about who was appointed, and then we could bring in Mzila. At the AGM we had our president Nolitha Fakude and three current office bearers being reappointed. So, you have Nolitha Fakude as the president, you have Peter Steenkamp who’s CEO of Harmony, Paul Dunne of Northam and Themba Mkhwanazi of Anglo American. And then we’ve a new office bearer, Nomaba Tsengwa from Exxaro.

So we’ve got four people carrying on to next year to provide us with continuity, because Roger Baxter is leaving. That’s the important thing.

And then secondly, you’ve got the senior team below the CEO remaining constant. I think that was good. We had the platform then to bring in a new CEO, somebody fresh, but clearly somebody who understands mining. I think that’s really the reason why Mzila Mthenjane was chosen.

FIFI PETERS: Okay.

TEBELLO CHABANA: Mzila Mthenjane has a long history in the mining industry. He has a BSc Engineering. I think he essentially got it [at] Anglo American, and in 1992 he started off as a junior mining engineer. He has had various roles in the mining sector.

So you’re talking about somebody who understands the business of mining from the technical side, from the social side, from the stakeholder relations side. And so [he has] over three decades of involvement in mining and in the financial sector, where he spent some time.

I guess through this process that was undertaken by our office bearers and the committee, they felt that [Mzila] would be the best fit for the Minerals Council to take us forward, because in the next era a lot of what we’re going to be doing as the Minerals Council is collaboration, developing those relationships, those partnerships with government, and other stakeholders to resolve some of these challenges that we have.

I think that’s part of the reason Mzila Mthenjane was appointed.

FIFI PETERS: I imagine there were other candidates in the race, but it clearly was a majority call for Mzila to push the council forward in the next era.

Let’s talk about that then in terms of the next era and some of the talking points and opportunities, and perhaps points [of pain] that still exist in South Africa’s mining sector – as you guys see things.

TEBELLO CHABANA: Some of the opportunities, some of the challenges?

We are still experiencing some big challenges in the industry relating to the efficiency and otherwise of our infrastructure. Eskom, the reliability of power, pricing, and all those kinds of issues remain a challenge for the mining industry which is essentially a large user.

But the good thing is that the private sector is coming on board with nine gigawatts (GW) of projects, 7.5GW of those coming from the private sector. So we are also in that regard trying to bring solutions to the table.

Another area relates to Transnet. You did mention the figure, the [lost] opportunity cost of R150-odd billion to the country had we been able to run the rail lines on [network] capacity and beyond. It’s been a big challenge for us.

You do know that we make up about 80% of Transnet Freight Rail’s annual revenue and about 50% of Transnet’s business – of Transnet in general, their business. So we are a significant customer but we are having some real challenges there.

We are still working, though, with Transnet. We’ve got this Recovery Steering Committee that has Transnet board and Transnet management representation, and we’ve got these four bulk commodity works streams – iron ore, coal, platinum, chrome – where we are trying to resolve some of the challenges we are having on those lines. So, those challenges do remain.

FIFI PETERS: But are they getting better? If we look at the reported loss for last year – R150 billion – and we look at what’s likely to emerge for this year, is it likely to be smaller or bigger?

TEBELLO CHABANA: I think the coal line has still got some challenges, so I don’t think there [will be] a marked improvement, especially on the coal and the chrome side. And maybe not on iron ore.

But on the manganese side I think there’s a bit of a shortfall of about R2 million … at the moment. So there are some signs there, but we cannot say that things are stabilising at this stage.

I think what’s important, though, is that we are getting a better understanding with the Transnet management team of some of the challenges and we are now going to be better able to help in addressing some of those challenges.

So we’ve still got a bit of a way to go. We’re not seeing, I think, the real fruits of those kinds of engagements. But one thing for sure, though, [is that] at least now the Transnet executive team is also fully engaged in this process.

FIFI PETERS: Okay. Tebello, thanks so much for giving us the highlights of your main meeting as the Minerals Council of South Africa. We look forward to engaging in future, particularly with the new CEO.

That was Tebello Chabana, the senior executive for public affairs and transformation at the Minerals Council.