• Market Watch

Coal firms in South Africa asked to pay millions

- 2023-10-25 00:00:00

Major coal exporters have been called on to each pay hundreds of millions of rands to help Transnet settle up with a Chinese locomotive supplier in a bid to solve South Africa's economically devastating logistics crisis.
High-placed sources at three of South Africa's largest coal exporting companies have confirmed to News24 that companies dependent on rail coal exports to Richards Bay were called on to each contribute several hundred million rand to help settle matters with the China Railway Rolling Stock Corporation (CRRC).
The total amount requested from industry is understood to be around R1.4 billion and will serve as a prepayment to settle the outstanding amount that Transnet owes to the Chinese manufacturer and to unlock the delivery of outstanding locomotives.
While coal exporting sources told News24 several mining companies had agreed in principle to help, they have not yet been asked to actually transfer the funds.
They hope that this will help finally unlock a protracted dispute with the Chinese manufacturer, which has caused the supplier to withhold the outstanding locomotives from Transnet as well as critical spare parts required for locomotives already utilised on the rail network.
The outstanding locomotives form part of an order for over 1 000 locos, only 590 of which were delivered before relations with CRRC soured.
Kickbacks
The Chinese company was among those found to have been implicated in state capture, having paid billions in kickbacks to Gupta companies as part of a locomotives supply deal with Transnet. This resulted in the Special Investigating Unit obtaining an order to freeze certain CRRC accounts, while the SA Revenue Service (SARS) instructed third parties to pay over money owed to the company, which it considered a "dishonest taxpayer".
Public Enterprises Minister Pravin Gordhan travelled to China to meet with CRRC executives in May this year, but a resolution was not announced.
Outgoing Transnet Freight Rail CEO Sizakele Mzimela recently said that the group could never have anticipated that CRRC would also withhold spare parts for those locos already delivered.
This, she said, had resulted in around 300 reasonably new locos left standing, awaiting repairs, and is among the key factors that caused the performance on the economically significant North Corridor to deteriorate severely.
Without the spares and locos, Transnet has indicated it cannot rail more than 60 million tonnes of coal annually, compared to a design capacity of 81 million tonnes.
The R1.4 billion in funds pales in comparison to the several billion in coal sales that have been lost due to declining rail performance, which has hamstrung the sector's ability to take full advantage of high export coal prices. One source said there would also be a mechanism for exporters to recover the funds they contribute.
Concern
There is now concern of a possible slowdown amid a leadership shakeup at the parastatal, in which several key executives have resigned this month. This includes Mzimela, Transnet CEO Portia Derby, and CFO Nonkululeko Dlamini. As reported by News24 on Monday, the managing executive of the North Corridor, Ali Motala, has also resigned from the organisation.
A monetary settlement has never before been mentioned by Transnet or government. Rather, the last remaining hurdles were said to lie between CRRC and SARS and the SA Reserve Bank (SARB).
While industry sources are under the impression there has indeed been progress on this front, further information in this regard has not been forthcoming.
Asked about the settlement funds, Transnet said it cannot, by law, disclose confidential taxpayer information. "Despite the significant progress made, there are remaining aspects to be resolved by government," the state-owned logistics company said. "Although customers offered support, it remains contingent on all matters to be resolved with CRRC."
SARS said it could not offer any information on its talks with CRRC as it is bound by Chapter 6 of the Tax Administration Act of 2011 from disclosing any confidential taxpayer information, "and this includes any investigations into any taxpayer," it said.
The SARB said it does not comment on specifics regarding discussions with individual entities.-Fin24