South Africa’s Sasol Ltd. and Transnet Freight Rail (TFR), an operating division of the beleaguered Transnet SOC Ltd. (Transnet), the state-owned operator of South Africa’s railway, ports and pipeline infrastructure, on Feb. 28 announced a first-of-its-kind public-private partnership to improve rail transport reliability in South Africa.
Under the five-year agreement, Transnet will deliver ammonia from Sasol’s Secunda and Sasolburg facilities to the company’s customers through a dedicated fleet of 128 ammonia tankers. In turn, Sasol will fund Transnet’s maintenance and repair program for the fleet.
“Sasol’s partnership with Transnet is an investment in South Africa’s rail infrastructure network, a critical economic driver for the country and a key business enabler for Sasol,” said Sasol Vice President for Base Chemicals David Mokomela. “The result will improve service to our customers and give us the transport capacity and reliability we need to respond to growing market demand. As one of South Africa’s largest companies, we are proud of this public-private partnership, which signals progress in advancing the country’s growth objectives.”
“We appreciate Sasol’s support of this deal,” said Acting TFR Chief Executive Russell Baatjies. “It is a significant step toward addressing the industry’s current capacity challenges and protecting the ammonia rail supply, a critical material used in South Africa’s agriculture, mining, and chemical markets.”
TFR and Transnet Engineering (TE), who will execute the Sasol ammonia fleet’s maintenance and repair work, expect additional revenue generation from anticipated increased haul volume and the Sasol-funded maintenance and repair work.
Sasol Chemicals produces and sells more than 540,000 mt/y of ammonia. It is used to make a variety of fertilizers and industrial chemicals for the agriculture, mining, textile, and metalworking industries.
On Feb. 28, South Africa appointed Michelle Phillips as the new CEO of Transnet SOC Ltd., four months after the former head quit. Phillips, who is currently acting in the CEO position, has more than 20 years of experience at the company in various roles.
Transnet controls a nationwide rail network with routes stretching over 12,500 miles and runs all the commercial ports in Africa’s most industrialized nation. The monopoly became a target of corruption during President Jacob Zuma’s rule and deteriorated further after he stepped down in 2018. Portia Derby, who was picked as CEO in 2020, quit in October along with several other senior executives after failing to improve its performance.
Transnet has slowed deliveries of coal from mines to the coast, with export volumes falling last year to their lowest levels in three decades. Many companies have resorted to using trucks to get their produce to port, causing havoc on the roads.
The National Treasury estimates that rail inefficiencies cost the economy 411 billion rand ($21.3 billion) last year. South Africa’s ports are ranked among the worst in the world. Coal producer Thungela Resources Ltd., petrochemicals giant Sasol, and retailer Woolworths Holdings Ltd. are among a slew of companies that have complained about Transnet’s shoddy services.
The bottlenecks at South Africa’s ports prompted MSC Mediterranean Shipping Co. to impose a congestion surcharge of $210 per 20-foot container of dry cargo it handles. A.P. Moller-Maersk A/S dumped Cape Town as a stop on one of its Asia shipping routes.
In addition to operational problems, Transnet faces financial difficulties. The company lost 1.6 billion rand in the six months through September and the Treasury has agreed to provide it with 47 billion rand in new debt guarantees.
Besides overseeing a recovery plan, Phillips will have to support government efforts to draw private investment into providing logistics services, a strategy that is aimed at increasing efficiency and resolving bottlenecks.