Published Date: 2021-07-22 | Source: INCE|Community | Author: The Finance Ghost
The soup is brilliant. It's the chef's specialty.
Creme de la Commodity Prices is the meal that South Africans have been waiting for since FIFA left our shores. After a decade of low prices, labour unrest, electricity disasters and all the other joys of operating in South Africa, the soup finally arrived.
It's delicious enough that nobody is sending it back. Yet, there's an annoying buzz that is ruining the entire experience. The fly in the mining industry soup is Transnet.
Under riot conditions, it's entirely understandable that our country's infrastructure suffered a wobbly. Still, the impact on companies has been substantial. Sappi released an announcement yesterday noting that delays in dissolving pulp exports in Durban will contribute to a negative impact on EBITDA of approximately R220m.
Richards Bay is critical for our coal exports. Whatever your views on ESG, large emerging markets around the world still depend on coal and South Africa benefits greatly from this reality. The price of coal has doubled year-to-date, positively contributing towards our current account surplus that kept the rand in one piece last week.
Transnet has confirmed that the Ports of Durban and Richards Bay have both reported normalised levels of operations over the past two days, which is certainly a relief.
The major issue is on the rail network, where cable theft remains an issue. Social media has been awash in recent months with images of destruction to our rail networks and associated infrastructure.
In Kumba's update this week, the company noted that rail and port constraints led the company to cut 1 million tonnes from its sales target. At an average price of around R3,200 per tonne, that's R3.2bn in sales that Transnet is costing not just Kumba, but our country's GDP.
These aren't new issues. Transnet is a serious headache for numerous South African companies. With these kinds of numbers at stake, it's another excellent example of how the government is dropping the ball for our private sector.
With our exports stronger than they have been in recent memory, a huge effort needs to be made to provide companies with the infrastructure that their taxes should be paying for.