Kumba Iron Ore sees new South Africa government open to rail reform

Anglo American Plc’s South African iron ore unit said the country’s new government is committed to grappling with logistics bottlenecks that are limiting exports, while acknowledging the problem could take several years to resolve. 

“One thing I have learnt about the new government is that they are open to collaboration,” Kumba Iron Ore Ltd. Chief Executive Officer Mpumi Zikalala told reporters on Tuesday. The firm last year announced it would slow production at its mines, blaming constraints on the state rail and port infrastructure used to transport the steelmaking material.

The African National Congress lost its parliamentary majority two months ago and has formed a coalition with rival parties including the pro-business Democratic Alliance, which won the second-most seats in the election. President Cyril Ramaphosa has said that economic growth is the administration’s overriding priority.

Despite encouraging early signs, Zikalala isn’t expecting a “full turnaround” of the infrastructure run by state-owned Transnet SOC Ltd. for at least three years. An independent review of the entire Transnet network should be completed during this quarter, she said. Kumba moves iron ore along a 535-mile (861-kilometer) railway to a port north of Cape Town.

Kumba said profit in the first half of the year fell 26% to 7.1 billion rand ($389 million), compared with the same period in 2023, due to lower iron ore prices and sales volumes. It has 8.2 million tons of iron ore stockpiled, with 90% stored at the mine sites – representing a rise of 1.1 million tons in the past six months. This is “higher than we would ideally like,” Zikalala said.

The Anglo subsidiary was already working with the previous administration on ways to improve the crucial infrastructure. While the immediate ambition is to collaborate with the authorities to prevent further deterioration of Transnet’s performance, the company ultimately would like to see the port and rail assets concessioned to new operators.

The firm wants “policy reform to enable greater private sector participation,” Zikalala said.