South African coal and iron ore exporters are preparing to sign investment agreements worth for billions of rand with state-owned logistics company Transnet to repair critical rail lines and enhance shipment capabilities.
The negotiations involve organisations representing companies such as Glencore and a unit of Anglo American, as stated by Ian Bird, head of transport and logistics for B4SA, reported Bloomberg.
“We are now at a point where something has to be done,” Bird said in an interview, noting that the condition of the rail lines affects both Transnet Freight Rail and third-party operators.
Poor maintenance and theft have led to the decline of freight rail lines, causing coal exports to fall to a 30-year low of 48 million tonnes (mt) in 2023, while iron ore railings have also hit a ten-year low.
On the other hand, coal railings increased to 52.1mt last year, the first rise since 2017, the report said.
However, this was below the 60mt target and made up just over half of the total rail capacity of 91mt.
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By GlobalDataTo boost export income, the government has agreed to permit private operators to run trains on these lines, starting from April.
While the specific terms of the agreements have not been publicly disclosed, they are expected to facilitate an influx of private capital and expertise.
In response to inquiries, Transnet estimated that repairing the coal line over three years would cost approximately R12.9bn ($700m), while the iron ore line would require about R9bn.
Furthermore, repairing all of its tracks, including those for containers and manganese, would require R64.5bn over five years.
“The conclusion of the agreements with the customers is on track. The investment is required to get these lines back up to a standard at which we can move more volumes,” Transnet stated.
Iron ore is exported from the Saldanha port on South Africa’s west coast, while most coal is shipped from Richards Bay on the eastern seaboard. Alongside gold, platinum group metals and cars, these commodities are among South Africa’s largest exports.
Bird emphasised that the goal is to restore the lines “to near-enough maximum operational capacity”.
He anticipates that the Treasury will clarify funding for the heavily indebted Transnet in the upcoming national budget.
He added that projected revenue from third parties is likely to be lower than expected due to tariffs being roughly halved following negotiations.
Independent groups have assessed the repairs needed for the coal and iron ore lines, with more studies planned for other routes.
