The SA economy should have grown by nearly 10 percent in 2022, but instead scraped by at 2 percent growth for the year.
That’s the view of Stellenbosch University logistics professor Jan Havenga. It is widely assumed that load shedding is costing the economy roughly R900 million a day, but that may be understating it.
Add Transnet’s inability to rail freight at anything like the volumes required, reckoned by the Minerals Council to have cost R50 billion in lost sales last year, and it’s not hard to see how a potential economic miracle that should have created millions of jobs went whizzing past us.
Havenga’s 10 percent missed growth opportunity surpasses PwC’s 7 percent estimate made in its SA Economic Outlook report earlier this year.
PwC reckons last year’s 208 days of load shedding reduced economic growth by about five percentage points in 2022. That’s on top of the nearly three percentage points of GDP growth lost in 2021 due to load shedding.
“Our research suggests we lost close to R400 billion in 2022 due to logistics problems at Transnet,” says Havenga. “R300 billion of that was because we could not get exports to port, mostly coal and iron ore, but the other R100 billion was a cost incurred because we end up over-paying for logistics – by, for example, using trucks instead of rail, and the impact this has on our road infrastructure.”
This year the loss to GDP is likely to be closer to R200 billion, roughly half that of 2022, mainly because of cooling commodity prices.
Transnet’s at a tipping point
Havenga adds that the current Transnet management inherited many of the problems they are now trying to solve from previous management. “It’s not all bleak, and the new management has shown improvements in some areas, but the under-investment in maintenance and infrastructure built up over the years is not easily reversed. But there comes a tipping point when instead of slow decline you get a collapse. We may not be far from that point at either Eskom or Transnet.”
SA coal was in high demand around the world over the last two years, when prices surged above US$300/tonne. They have since eased to around US$130/t. The rail and port network was unable to handle demand when prices were at their peak, so SA missed the full benefits of the commodity boom.
The Richards Bay Coal Terminal (RBCT) has an annual export capacity of about 90 million tonnes, but the most ever handled was 81 million tonnes. Last year the terminal handled about 52 million tonnes, which is a drop of 29 million tonnes from the peak. This massive drop in volumes had a material impact on GDP, coal miners’ profits, tax revenues and job creation, says Havenga.
Compounding the pain was the 11-day strike at the country’s ports in late 2022, which left goods worth R65,3 billion sitting in warehouses or quayside instead of on ships. The South African Association of Freight Forwarders (Saaff) reckons most of these potential exports have been lost forever, but adds that the cost pales alongside the R1,5 billion additional wages won by Transnet workers. This underscores the urgency in finding quicker, less destructive resolutions to matters that impact the national economy, says Saaff.
Mining sector faces existential threat
African Rail Industry Association CEO Mesela Nhlapo says the mining sector is facing an existential threat due to the continued deterioration of Transnet’s rail freight volume capacity.
“Over the past year, mining production has slumped by 9 percent year-on-year, and the mining industry lost an estimated R50 billion in exports in 2022 – all due to logistical and energy constraints. In addition, mining could have brought in more than R150 billion extra if Transnet had operated at nameplate capacity.
“About 87 perent of all freight in the country is moved by road. This is unsustainable and dangerous, as we have again seen with the recent truck accidents around the country.”
Nhlapo says it is more urgent than ever for government to implement the National Rail Policy, which is supposed to allow third-party access to the freight rail network, though this has been slow out of the gate.
“We have (a) policy on the table – the White Paper on National Rail Policy – which was approved by cabinet in March last year. The policy outlines steps to revitalise rail infrastructure and enable third‐party access to the freight rail network. And it must happen now,” says Nhlapo.
Freight volumes back to World War II levels
Havenga says SA’s container terminals in 2010 rated slightly better than its emerging market peers, but that situation changed in 2014 and there’s been a deterioration in performance every year since then. “The terminals are getting worse each year, and it’s happening very fast,” he says.
The same applies to the Joburg-Durban rail corridor, which used to handle well over 107 trains a day. Now the figure is less than 10 and often closer to four a day, says Havenga.
SA’s general freight volumes have dropped to levels last seen during World War II: roughly 50 million tonnes a year. In the last 20 years, while India’s freight volumes increased 370 percent, SA’s actually declined. Last year the coal line hit its lowest volumes since 1993, while iron ore exports are at their lowest since 2010. The container corridor between Joburg and Durban used to handle 335 000 containers a year. That figure dropped to about 140 000 last year and is possibly getting worse. – Moneyweb
