Rising demand for coal will be a boon for mining workers in South Africa but many are unable to take advantage of Europe’s search for alternatives to Russian fuels because of the state of the facility. The country’s infrastructure is bad.
The price of South Africa’s standard export coal has doubled since the start of the year as European countries buy alternative sources of coal ahead of an EU ban on Russian imports later this year as part of sanctions. Ukraine war. The EU will also allow the burning of more fossil fuels to replace Russian oil and gas in the coming years.
But the mass theft of copper cables and train shortages due to corruption under Jacob Zuma, the former president who resigned after a cloud of scandals in 2018, have caused problems for Transnet, the transportation operator state goods. “We just couldn’t meet our contractual obligations in terms of coal volumes [miners] must move,” Portia Derby, chief executive officer of Transnet, told the Financial Times.
“It’s happening around the world – supply chains are being stretched,” said Bevan Jones, managing director of Africa Source Markets. But South Africa had “scored a couple of own goals by Transnet and the railway”.
Mr. Jones said South African coal is a suitable substitute for Russian coal, but the country exported only 2.9 million tons to Europe last month. At that rate, the total year could be no more than 40 million tonnes, according to coal analyst Xavier Prévost of XMP Consulting. Last year, South Africa exported 58 million tonnes through the Richards Bay coal terminal, the lowest level since the 1990s and far below capacity. The rail line from the mining town of Ermelo to Richards Bay can carry 77 million tons and the port can hold 91 million tons.
The Minerals Council of South Africa said miners lost 35 billion rand or more than $2 billion in revenue last year because they were unable to ship bulk goods such as coal that they had contracted to sell. Mesela Nhlapo, executive director of the African Railway Industry Association, referring to Transnet, said: “I don’t understand why one unit costs the country so much.
Transnet said it is doing everything it can to restore operations. “About 80 per cent of our revenue comes from the mining industry and of that, a large portion of our profits come from coal – so we are in favor of moving coal,” said Derby.
The freight company is also suffering from a lack of coal-powered trains, a direct legacy of the systematic looting of government resources known as ‘state occupation’ under Zuma, before he was overthrown by Cyril Ramaphosa and replaced as president.
During Zuma’s presidency, Transnet agreed to pay 54 billion rand for more than 1,000 locomotives from Chinese and Western manufacturers. The deal was overvalued and potentially consequential, and nearly a decade later, only about half of the trains have been delivered, according to a judicial investigation. “Basically, coal is most affected” by the shortage of ships because of the need for specialized locomotives, said Derby.
South African miners such as Exxaro and Thungela, a subsidiary of Anglo American’s former local coal mining operations, have denied Transnet’s force majeure claim. They are discussing with the operator to find a solution.
There are few transport alternatives for exporters. “Trying to find a truck anywhere now is a problem. Now they are like hen’s teeth. It was crazy,” Jones said.
European sanctions against Russia could help other African coal-producing countries. This week, a port in Mozambique received coal from landlocked Botswana, where it is shipped to Europe, a milestone for a new export route, said Grindrod, the port operator. Coal from Botswana is also being shipped to ports in Namibia, analysts say.
Despite Russia’s need to replace coal in the short term, Europe is still moving away from fossil fuels in the long term. That means South Africa’s coal buying trend won’t last this year and the country’s export future lies in Asia, Jones said. But the increase has highlighted that decarbonization will not be straightforward in either Europe or Africa.
Last year, European countries joined the US and UK in pledging $8.5 billion in renewable energy funding in South Africa in exchange for accelerating plans to phase out coal. The war in Ukraine has complicated that transition. “It’s European hypocrisy to say we want your coal, but you should decarbonise,” Jones said.
