Category Risk Management

Coal Export Plunge Reveals Risk Realities

30 January 2024 Riskonet

Coal exports to Europe plunging to their lowest point since 1992 signal significant and growing risk to the South African entire logistics and supply chain infrastructure says Volker von Widdern Risk Principal at Riskonet Africa.

Last year saw a dramatic 57% decrease in annual shipments due to persistent disruptions in rail transport.
Says Von Widdern: "The decline we're observing is unprecedented and paints a stark picture of the challenges ahead. Rail disruptions have severely restricted our capacity to export coal, particularly impacting the Richards Bay Coal Terminal (RBCT) – the biggest facility of its kind in Africa. This situation is more than an economic setback; it's a critical reminder of the vulnerabilities in our supply chain and the urgent need for robust, sustainable solutions."

He says an alarming fact is that over a third of coal exports are now being routed through road carriage terminals, which exported 26MT but faced various capacity constraints.

“This shift from rail to road transport is not only incurring additional costs but is also causing significant environmental damage to roads and communities. Despite the necessity of the road terminal in supporting the coal miners' results and leveraging the recent coal boom, this mode of transport raises critical concerns regarding its alignment with the sector's stated commitment to Environmental, Social, and Governance (ESG) principles and overall sustainability.”

Von Widdern says the reliance on road transport, while deemed essential in the medium term, seems to contradict the ambitious goals for social responsibility and environmental compliance often highlighted in the mining sector's integrated reports. This situation underscores a potential misalignment in prioritizing financial performance over ESG and sustainability goals.

He also suggests that the true economic cost of the substantial decline in capacity of Transnet and RBCT is not being adequately measured. “The broader impacts on infrastructure, communities, and the environment due to the increased reliance on road haulage are neither quantified nor accounted for, raising questions about the long-term viability and responsibility of this alternative service.”

Von Widdern believes addressing the capacity issues of Transnet coal haulage remains a paramount concern for the coal mining industry and RBCT.

“With risk tolerance levels possibly being exceeded, there's an urgent need for new strategic and long-term solutions, potentially involving the coal miners and the private sector assuming operational responsibilities for the coal line through various Public-Private Partnership (PPP) and Build-Operate-Transfer (BOT) models.”

He says the crisis raises alarm bells about the resilience and reliability of South Africa's infrastructure and industry stakeholders and policymakers need to take swift and decisive action.

"The ramifications of these rail disruptions extend beyond the coal industry. They underscore a systemic issue within our national infrastructure, highlighting the need for comprehensive risk assessments, infrastructural investments, and strategic planning to fortify our supply chains against such vulnerabilities."

Von Widdern says clearly there is a pressing need for greater collaborative efforts not only address the current disruptions but also to lay down a resilient framework for the future.

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