STUART THEOBALD: What’s behind the campaign against coal exports?

Allow me for a moment to fall into the trap that has been laid. The campaign against coal exports from SA is the biggest load of nonsense to hit the social media airwaves since the Gupta-driven campaign against banks.

According to various tweeters, the load-shedding crisis has something to do with exports of coal from SA. Somehow, nefarious businesses are diverting coal from Eskom’s boilers to Europe, thereby leaving power stations stricken. This beggaring of SA again by the Europeans, according to this narrative, calls for violent intervention such as disrupting coal transport to Richards Bay.

What drivel.

Let’s start with facts. SA has always exported a lot of coal. It is a big source of foreign earnings and enables many mines to exist. About 30% of the tonnes mined in SA are exported.

Eskom generally has positioned its power stations next to coal mines and has contracts with them to supply their coal needs (there are exceptions — Majuba most obviously, which has about 700 trucks of coal arrive every day). Those power stations are built to consume qualities of coal with specific thermic features.

Most mines also produce coal that Eskom cannot burn which has a higher calorific value, and this output is generally exported. This is essential to the economics of the mines: the export-quality coal provides revenue, allowing Eskom to benefit from lower-cost coal that meets the specifications of its power stations. Of course, it is also important to note that many of these power stations have been unable to consume the supply that is contracted to them because of failures of the power stations.

It is true that much more SA coal has been finding its way to Europe. The Europeans are doing everything possible to reduce exposure to Russia, from which it used to import a lot of coal. SA is a beneficiary of this displacement. By reports in 2022, coal exports to Europe were up six-fold. That sounds dramatic but hold your horses.

The fact is that overall, coal exports have been static to declining at between 80-million tonnes and 90-million tonnes a year for a long time. Overall, in 2022, SA exported less coal than it did for several years before Covid-19, though that was a recovery from 2021, when total coal exports were the lowest in 25 years.

That is because there is a big bottleneck on the amount that can be exported — capacity at the Richards Bay Coal Terminal and the rail to get it there. There has been growth of exports via Mozambique and the Durban port, but that capacity is a fraction of Richards Bay. In fact, the growth of exports of coal to Europe has come at the expense of other destinations — India particularly, which remains by far the biggest export destination for SA coal, about three times the volumes going to Europe.

Why did coal exports fall dramatically in 2021? In a word, Transnet. Coal export lines faced sabotage, extortion, cable theft, maintenance failures and assorted other ills. So, while the global coal price has been surging, SA’s export volumes have been flat to negative. International prices this year have breached $400/tonne compared with the $50-$100/tonne range they traded in for the decade until 2021. The fact is that SA should be taking advantage of these record prices and exporting far more. It would be a big windfall for the country.

I opened this column describing it as a trap because the coal export narrative should be starved of the oxygen of publicity. It is without foundation. But what is it that those who are pushing the story hope to gain?

Well, one big concern facing the whole country is the performance of Transnet. Indeed, as is now well known, the Minerals Council was so concerned in 2022 it wrote to the board of Transnet calling for a wholesale change of management of the parastatal. Transnet’s own annual report for 2021 reports on the serious challenges it has faced on its coal lines, which account for 35% of its freight volumes, bemoaning security and locomotive availability. The Minerals Council described the collapsing services of Transnet as an “existential crisis” for the mining sector.

The coal exports narrative has arisen just as attention turns to Transnet’s operational collapse. Could this be an attempt at diversion? Do those pushing the narrative imagine that if export volumes fall thanks to Transnet’s failures, the country will somehow come to think this is a good thing? “Exports have been restrained, our campaign has been successful!” Perhaps they hope this narrative will divert attention from the real cause, being the failure of Transnet.

Of course, the other possible driver of the narrative is the extortion racket that is bedevilling the supply line. Organised crime gangs are targeting coal producers for protection money. Thanks to better industry security arrangements with Transnet, the Richards Bay line is being better policed with drones and other technology. The call for mass violence on the line may be a lashing out of those who are finding it harder to squeeze producers.

None of this should distract us. We must be sharply focused on Transnet and its performance — it is a serious risk to our whole economy.

• Theobald is chairperson of research-led consulting house Intellidex. This article first appeared in Business Day.