Transnet and Eskom crises put SA in a spot, says Anglo boss Duncan Wanblad

SA mining houses face “a unique conflation of issues that are destabilising” the operating environment. Key among these is the inability of Transnet and Eskom to supply sustainable and reliable logistics and electricity services.

This placed SA in a “delicate position”, in which both these “backbone” infrastructure services are in crisis at the same time, says Anglo American CEO Duncan Wanblad.

Over and above the infrastructure problems that are dragging on SA’s economic activity, Wanblad said, it was “very important as South Africans to stand up against corruption in all shapes and forms, because that is the thing that brings us down at the end of the day”.

Stability and the reliable delivery of services such as electricity and supply chain logistics are the factors that are most important for mining houses when they consider investing in a country, he said.

Results presented by Anglo American’s operations in SA this week showed how the dysfunction at Transnet and the deterioration of electricity supply by Eskom were having a real effect on its businesses. Anglo subsidiary Kumba Iron Ore said that poor performance by Transnet cost it R10bn in lost earnings last year. The iron ore producer’s net profit for the year to end-December 2022 plunged 55%.

At the same time, Anglo American Platinum (Amplats) saw profit decline 38% for the year and attributed this, at least partially, to the effect of load-shedding at its SA operations.

Amplats CEO Natascha Viljoen told Business Day earlier this week that the effect of load curtailment that flowed through the final production last year was about 30,000 refined ounces. At an average rand platinum group metals (PGM) basket price of about R41,400/oz, this translates to lost earnings of about R1.2bn.

Stability

“No matter which country you operate in ,there are a couple of things that big mining companies will always look for — this includes political and social stability, and fiscal stability particularly,” Wanblad said.

“We need that because we make very capital-intensive multibillion-dollar investments that take multiple years to pay back. SA really is in a very delicate position. We continue to work very closely with our government and business partners to solve these problems. I am confident that they are solvable problems.”

Wanblad believed SA still presented “incredible” opportunities because of its minerals endowment, and he remained optimistic about the country.

Finance minister Enoch Godongwana on Wednesday said the lack of reliable electricity supply was the biggest economic constraint in one of Africa’s biggest economies.

Godongwana added that SA had experienced a record 207 days of load-shedding in 2022 compared with 75 days in 2021. This year, power cuts had become a daily occurrence, with some companies making contingencies for a possible stage 8, a move that will be unprecedented in the country’s history.

In a desperate move to arrest the worsening energy outlook, President Cyril Ramaphosa two weeks ago announced a state of disaster and the appointment of a yet-to-be named minister of electricity as measures to try to deal with the crippling and unprecedented energy crisis.

Stockpiles

Transnet has not fared any better. The Minerals Council SA said its members had reported stockpiles at their mines that they cannot move through the country’s ports due to Transnet’s inefficiencies.

The council has publicly called for the sacking of Transnet CEO Portia Derby over the underperformance of the state-owned entity.

“We are concerned about what this development means for mining production and jobs at these operations in the longer term,” Henk Langenhoven, Minerals Council’s chief economist, said in a statement on Thursday.

“It is vital the rail and port networks are stabilised and optimised as per the work being done in the recovery steering committee,” Langenhoven said.

Transnet in January issued a request for quotations for private sector participation in its container corridor between Johannesburg and Durban.

Ramaphosa in his state of the national address delivered two weeks ago said work was under way to develop a Transnet road map that will include the restructuring of Transnet Freight Rail to create a separate infrastructure manager for the rail network by October.

Langenhoven said that Ramaphosa’s undertaking laid the groundwork for the “private sector to participate on the country’s rail network, improving efficiencies and boosting exports”.

erasmusd@businesslive.co.za