(Bloomberg) -- South Africa’s government berated Transnet SOC Ltd., which runs the state freight-rail monopoly, for its poor performance saying its costing jobs in a nation where one in three are unemployed.
Michelle Phillips, who took over as Transnet’s chief executive officer in February, faced sustained criticism of the company’s failure to lift freight volumes from government ministers at a closed-door meeting held in President Cyril Ramaphosa’s presence on Tuesday, two people at the event said. They asked not to be identified as the discussions were private.
The impact of the decline in rail services on economic growth was laid bare on Wednesday at a public presentation by a presidency official, which was attended by ministers, government officials and leading executives.
The amount of freight moved on Transnet’s lines rose to 152 million tons in its last financial year, from 149 million tons the year earlier, but remained well below the 220 million tons needed to stop mining companies and other clients from cutting jobs, the presentation showed. Volumes were a third less than they were in the year ended March 2018.
“If we are not going to be able to get that volume out, specifically about 200 million tons per year, then we do sit with a significant challenge where we begin to see the impact on critical sectors,” Rudi Dicks, head of the project management office in the presidency, said at the presentation. “We’ve got to push and be much, much more ambitious.”
Transnet is targeting moving 170 million tons of freight this financial year, the presentation showed. The company acknowledged the receipt of queries from Bloomberg, but didn’t immediately respond.
The collapse of South Africa’s freight-rail services has driven iron ore and coal exports, two of the country’s biggest sources of foreign exchange, to multi-decade lows. Kumba Iron Ore Ltd. has cut jobs as a result, as have coal miners Glencore Plc and Seriti Resources Holdings Ltd.
“Transnet Freight Rail’s target, while higher than last year, is below contracted volumes,” the government and the B4SA business group said in the presentation. “Retrenchments in key economic sectors will continue if performance doesn’t improve.”
The company needs more oversight from government and better forecasting of volumes so that customers can plan, they said. It also needs to act faster to find private partners to invest in its business, they said.
South Africa’s government has detailed plans to open up the rail lines to other operators, with mining companies and carmakers expressing interest in having private firms move their output. Details of how that will work have yet to be ironed out.
A so-called network statement, which will detail the terms and conditions of private usage of the lines, may be released this month, the presentation showed.
The company is targeting October for the first private trains to run on its lines and a unit to help boost private investment in rail and ports should be operational by November, the government and business group said in the presentation.
--With assistance from Ana Monteiro.
(Adds detail from presentation from eighth paragraph)
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