Kumba said in its quarterly production report that Transnet was squarely to blame for the company’s poor Q4 performance as it also warned of an expected decline in full-year earnings. 

“Transnet’s logistics remain a concern with poor performance continuing subsequent to the two-week wage strike in October 2022 and the annual maintenance shutdown in November 2022. This limited production to 10.0 Mt, representing an increase of 3% in Q4 2022, while sales decreased by 35% to 6.9 Mt, largely due to Transnet’s performance,” Kumba CEO Mpumi Zikalala said in a statement. 

The company went on to say that “the suboptimal logistics performance … has resulted in low levels of finished stock at Saldanha Port”.

This represents a significant bite into the company’s profits. In a trading statement coinciding with the production report, Kumba said it expected headline earnings for the full year to fall “between 38% and 44% from the previous year ended 31 December 2021”.

“The decrease in earnings for the period is largely attributable to the lower average realised FOB export ore price and lower sales volumes, partly offset by a weaker rand/US$ exchange rate,” the company said. 

Kumba CEO Mpumi Zikalala. (Photo: Supplied)

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Kumba’s share price rose more than 2% in morning trade on Thursday after the report and trading statement were released, but this likely stemmed from a more than 2% rise in the iron ore price. It also suggests that the traders and analysts were expecting something along these lines. 

Speaking of prices, Kumba’s quality product fetches a premium, translating into bigger sales losses and opportunities missed. 

“Kumba’s premium product quality and geographically diverse customer base contributed to an average realised price of US$113 per wet metric tonne (wmt) for the year, 13% above the benchmark price of US$100/wmt,” Zikalala said in the statement. 

Fortunately for Anglo American, its Minas-Rio operation in Brazil stepped up to the plate, underscoring how state failure raises the risks of investing in South Africa’s mining sector — an unflattering contrast to other jurisdictions. 

“Iron ore production increased by 4%, reflecting higher plant availability at Minas-Rio, and improved operational performance at Kumba’s Sishen mine, which more than offset the constraints on Kolomela’s production that resulted from disappointing third party logistics performance,” Anglo said in its production report for all of its operations. 

Kumba’s decline in sales is not just its loss or Anglo’s. It represents less foreign currency flowing into South Africa and a smaller contribution to the economy’s overall GDP, among other losses to the wider economy.

In short, the costs of state failure in South Africa are mounting. DM/BM