Coal, you can love it or hate it as a fossil fuel, but for South Africa it is still a vital component of its energy mix.
Approximately 30% of the coal mined in South Africa is exported while the other 70% is consumed locally in the generation of electricity, feed for steel, gasification at Sasol, and inputs in other industries.
Exports bring in the bucks. But due to Transnet’s woes companies are struggling to get their commodities to local ports.
Coal exports were at a record low from the Richards Bay Coal Terminal (RBCT) of 50.35 million tons (Mt) last year. Levels this low were last seen in 1997 at 58Mt. This was a lost opportunity for South African exporters during a time when coal prices were at record highs because of the war in the Ukraine. An estimated R20 billion was lost by exporters because of the problems that affected Transnet during 2022.
Transnet Freight Rail was constrained in three main areas: namely the strike that lasted 12 days, train derailments, one of which was so severe that the northern line was locked down for almost ten days, as well as other derailments on the line during the year that affected the capacity for coal exports to the RBCT. This prompted some exports to go via Mozambique to Maputo’s port, doubling its coal exports in 2022.
The third constraint, and in the most control of Transnet itself, is the unavailability of the original equipment manufacturer (OEM) spare parts required for the new locomotives purchased from Chinese manufacturers. This was in retaliation to the South African court’s suspending the infamous contract of R54bn for 1064 locomotives due to maladministration.
CEO of Transnet Freight Rail Sizakele Mzimela, speaking at the McCloskey Coal Conference in Cape Town on Thursday, said, “There was no expectation that the reaction of the Chinese would be to stop supplying us the spares not only for the locomotives that were under the 1064 transaction, but for the locomotives we also bought from the Chinese prior to the 1064 [contract].”
This has meant that during 2022 up to 138 locomotives were parked because of a lack of OEM parts needed for the maintenance of the locomotives. This severely hampered the capacity of Transnet to be able to export coal through the Northern line to the RBCT. As a result, South African coal mines were unable to export an additional 20Mt possible during a time of coal price highs. RBCT has an export capacity of 91 Mt.
To date the issue with the Chinese locomotives manufacturers has been sorted out (up) to a point on Transnet’s side.
“It’s out of my hands nothing more I can do,” said Mzimela as the new contract was contingent on the Chinese having issues of requiring tax clearance by SA Revenue Service and additional compliance with the South African Bureau of Standards sorted.
If the deadlock with the Chinese continues Transnet could see up to 168 locomotives parked this year, constraining their export capacity to 60Mt in 2023. This is where intervention from government needs to expedite the issues with the Chinese.
Another problem that has plagued Transnet, adding to the unreliability of the service, is cable theft. It is estimated that R2bn of damage in cable theft has occurred on the rail infrastructure.
“It’s not only the overhead cables, but also the cable connecting the signalling equipment that is stolen from the network, which added delays to the movement of the locomotives,” said Mzimela.
Partnerships between industry and Transnet are focusing on the cable theft problem. However, the key partner, the police, are still missing in action. Recent videos showing cable theft right outside a police station fail to inspire confidence.
Transnet’s woes aside, South Africa needs coal to keep its lights on amid a power crisis that Eskom so far has been unable to solve.
While the West puts pressure on South Africa to de-carbonize, we must not be gaslighted into sabotaging South Africa’s economic development for unrealistic green goals. This as Europe is buying coal hand over fist amid an energy crisis after Russia’s invasion of Ukraine and subsequent sanctions.
If we blindly pursue the green agenda we might as well be scoring own goals.
If Eskom were to follow the greenies requirements, 22 GW worth of coal fired generation would need to be shut down due to non-compliance with carbon emission levels. Carbon capture and sequestration at these power stations are unfeasible as the cost to implement would cripple the economies of power stations, many of which are reaching the end of their operational lifespans.
By 2035, nine power plants would have reached the end of their lifespan with Komati in Mpumalanga already reaching the end recently. The alternative is to invest R300bn into flue-gas desulfurization equipment to meet the government’s minimum emission standards.
The Just Energy Transition plan also has challenges that have not been solved, the main coming in the form of capacity and stability in the grid.
“There is no more capacity in the grid in the Northern Cape for any more renewables to be connected up,“ said outgoing Eskom CEO André de Ruyter. “We find ourselves in the current energy predicament because in the past we spent insufficient time talking about the future”.
If we want to move away from coal-fired generation to renewables it will be necessary to invest R 1.2 trillion into the South African power sector over the next decade.
“The strategic priority is to address the grid or we will face far more serious constrains in the future” said De Ruyter. This includes new transition lines as well as 4000MW of hydro pumped storage necessary for grid stability in the medium term.
