Transnet Group CEO Portia Derby has described a letter from the Minerals Council calling for her to be axed as “outrageous”. She said members’ antagonism sprang from their opposition to the opening up of the bulk commodity export rail line to more black miners.
Transnet announced late last year that its allocation for emerging miners on the manganese export line would increase to 4-million tonnes while larger operators would transport 12-million tonnes.
One company, South32, has a 3-million-tonne manganese export capital allocation.
Derby said the introduction of more junior players on its manganese export lines has not gone down well with some of the big miners and their lobby group, the Minerals Council, which in December wrote to the board of Transnet asking for her to be sacked for poor leadership.f
“When we started having the conversation with the miners, we had one of the mining companies write us three threatening letters, saying they will take us to the Competition Commission. We said ‘fine, we’ll 'meet at the Competition Commission’ because the last time I checked, increasing competition is what they are supposed to be backing. And increasing the inclusion of junior miners and black people is essential if you are going to grow this economy.
“If people who oppose that call me incompetent, it’s OK.”
She said larger mining companies had repeatedly told Transnet not to worry about juniors “as they would share their allocations with them”.
The Minerals Council is focused on the deteriorating performance of the rail network. We have engaged Transnet’s board, which responded quickly and decisively to our concerns
— Allan Seccombe , Minerals Council spokesperson
“Whenever we raise transformation and bringing in junior miners, they all without fail across the system put up their hands and say ‘don’t worry we’ll take care of that’. We said: 'No, we don’t have a problem with that, we’ve adjusted our contracting systems so we will be able to contract the junior companies.’
“We are fine, we can deal with that sort of thing, we’ve got to share.”
Transnet has been on a drive to open not just the manganese line but also the coal line to black players. In October, Derby told a mining investors' conference that any new allocations on the coal line to Richards Bay would go to black-owned companies.
This and Transnet’s management of rail and ports has heightened tensions between it and the Minerals Council, whose members are losing billions in revenue because they can’t get all their export orders to ports.
In a letter to Transnet board chair Popo Molefe in December, Minerals Council chair Nolitha Fakude called on the board to take urgent action and fire Derby and Transnet Freight Rail CEO Siza Mzimela because of poor performance.
“For more than 24 months, we have given the benefit of the doubt to the Transnet management team, who have aptly demonstrated, through several bizarre decisions and statements, and in particular the ongoing tragic decline in the performance of Transnet, that they cannot resolve the crisis and are not capable of turning around the performance. We are insisting on the critical need for urgent change,” Fakude wrote.
Speaking to Business Times from the group head office in Braamfontein, Derby described the letter as outrageous.
“I think it is outrageous but beyond a certain point. For me, I don’t know any moment when transformation has been easy in this country. If it has never been easy, why would we think it would be easy now?”
She said the view of the Minerals Council was not shared by most mining companies, which had good relationships with the entity she leads. She said many miners had distanced themselves from the Minerals Council's stance.
“We have a perfectly good relationship with the mining companies themselves. The lobby body is a lobby body, I can’t hang my head on a lobby body. It’s the customers that matter. For me, the customers who matter are the customers with whom we contract.”
Minerals Council spokesperson Allan Seccombe said on Friday their gripe with Transnet's executives had nothing to do with opening up the manganese line.
“This is not a matter of manganese allocations. The Minerals Council is focused on the deteriorating performance of the rail network. We have engaged Transnet’s board, which responded quickly and decisively to our concerns. Together, we have set up joint teams to identify and urgently resolve bottlenecks on mineral export corridors. The inclusion of additional mineral exporters can best be done by ensuring Transnet Freight Rail is stabilised, returns to contractual volume levels, and then achieves installed nameplate capacity,” Seccombe said.
But Derby said she was puzzled that the council would choose to call for her head when they were kept abreast of the challenges faced by not having enough locomotives to move goods, containers and minerals.
China’s Railway Rolling Stock Corporation (CRRC) E-Loco has refused to supply Transnet with parts for 90 20E and 100 21E locos acquired between 2012 and 2014. The contract was set aside in December 2019 for inflated pricing during the state capture era. The spare parts are crucial to servicing the locomotives Transnet needs to meet demand from clients. Mining companies have complained that the lack of locomotives costs them up to R35bn a year in lost earnings.
Derby said they had done everything in their power to convince the Chinese to release spare parts. They even lobbied the mining industry to help, but that came to naught.
"We talked to the industry. By then we had tried to secure parts from the Russians, any third party that we could lay our hands on, but failed. We went to the [industry] and they said they could help; the RCBT (Richards Bay Coal Terminal) in particular were going to help. We gave them all the part numbers we were looking for — they tried, they failed."
Derby said the Minerals Council and mining clients are kept fully informed about the problems with locomotives. “I can’t be talking to you and you know exactly what the problem is [but] you jump up and use these things, saying this is why there’s a problem with leadership. Even in terms of financial resources, they know exactly the position Transnet is in.”
Apart from a shortage of locomotives, Transnet has to contend with criminal attacks on rail infrastructure, with cables and rail lines getting stolen daily. It also battles to fully maintain rail infrastructure off its balance sheet.
Seccombe said the Minerals Council was of the view that the problems at Transnet ran deeper than a shortage of parts and cable theft.
“The Minerals Council has engaged Transnet’s management for a number of years on possible solutions, including partnerships. The coal mining industry, for example, spends more than R100m a year providing security for the railway line. However, the continued deterioration in services as flagged by our members indicates that the problems run deeper than locomotive parts and crime. That’s the reason the Minerals Council board held urgent talks with the Transnet board in late 2022 and have reached an agreement for a partnership to urgently address the constraints,” he said.
Derby said she was in favour of the German model in which government invests heavily in infrastructure maintenance but allows competition on the operations side. While she understood there were competing priorities for public funds, the government needed to invest in rail if the economy was to grow.
“The state as a shareholder is the same as private shareholders; now and again there are capital calls on shareholders and if there’s a capital call, you’d expect that the state should be able to deal with it.”
She admitted that Transnet was in a bad financial position but, with the establishment of an economic regulator for rail who will also determine tariff increases, Transnet was hopeful this would put them in a stronger financial position.
“The next big one which should be regulated is TFR (Transnet Freight Rail) and my sense is that over the next couple of years, at least on the track side, we should be in a much stronger position in terms of being able to fully fund track — and of the quality we require to grow the economy.”
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