June 25, 2024

(Bloomberg) — Glencore Plc and Seriti Resources Holdings Ltd. are in talks to cut hundreds of jobs in South Africa as their ability to export coal is stymied by inefficiencies at the state-run freight company.

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Transnet SOC Ltd., which transports the fuel from mines in Mpumalanga province to Richards Bay Coal Terminal, has been hobbled by sabotage, cable theft and aging equipment. While it has taken steps to improve security and ease procurement rules to lower costs, performance has declined.

“Transnet’s operations are a crucial cog in the country’s economy,” the National Union of Mineworkers, a labor group, said in a statement calling for President Cyril Ramaphosa to intervene. “The situation is very dire.”

Glencore started a so-called Section 189 process, beginning consultations with labor on job cuts, according to NUM. The process could affect more than 200 workers at its iMpunzi coal mining complex, online publication News24 reported earlier. The company declined to comment.

That adds to potential cuts of more than 600 workers at Seriti’s Klipspruit opencast mine, Chief Financial Officer Doug Gain said in a reply to questions on Sept. 20.

Lower coal prices have also added pressure on operations. European demand for the fuel surged after Russia’s invasion of Ukraine, pushing prices to $450 a ton but have since dropped by almost two-thirds.

Miners have tried to get around the railway challenges by using trucks to transport coal from mines to the coast, but that’s become less attractive after prices dropped. Another coal producer, Exxaro Resources Ltd., has temporarily stopped shipping by road. Exxaro didn’t respond to emails seeking comment.

‘Catastrophic Proportions’

“Transnet can only address its core challenges to ramp up volumes on its rail networks and ensure a stable operation in the export coal sector,” the company said in a reply to questions. “We are aware of the significant decline in the coal market prices and can only assume that this would have an impact in the number of jobs in the industry.”

Ramaphosa described the constraints as “a crisis of catastrophic proportions” in a meeting with key exporters in April and created a task force that includes private companies to look for solutions.

The NUM, which was co-founded by Ramaphosa and played a key role in resisting the apartheid government, said the lack of results and neglect of Transnet could endanger its backing of the African National Congress.

“Such delays and the Transnet neglect threaten our ability to stand in support of the ruling party,” it said.

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