Iron ore sits in freight trucks before shipping by rail at the Sishen open cast mine, operated by Kumba Iron Ore. File picture: Nadine Hutton, Bloomberg
KUMBA Iron Ore, the Northern Cape-based subsidiary of Anglo American, is calling for private sector involvement in the management of the crucial 861km rail line linking its Sishen mine to the Saldanha port.
The rail corridor, currently operated by state-owned Transnet, has been plagued by inefficiencies, including derailments and financial constraints, which have severely impacted the miner’s ability to export iron ore. Similar challenges have affected other bulk commodity exporters in the Northern Cape, contributing to overall disruptions in South Africa’s mining logistics.
Kumba’s CEO, Mpumi Zikalala, has emphasised the need for a dedicated operator to take over the line, saying that concessioning it to a private player could significantly improve operations. This follows Transnet’s move in December to open its rail network to third-party investment, an attempt to reverse declining freight volumes. However, previous attempts at private-sector collaboration, such as the 2023 agreement with Traxtion Sheltam, were met with difficulties, raising questions about the feasibility of such partnerships.
The challenges with rail capacity have had a direct financial impact on Kumba, forcing the company to scale down production as stockpiles swelled to 7.5 million metric tons last year. The iron ore giant reported a sharp 45% drop in annual earnings, with headline earnings falling to R12.5 billion in 2024 from R22.7 billion the previous year.
Reuters reported that despite the decline in profitability, Kumba’s board approved a total dividend payout of R38.67 per share, representing 100% of its headline earnings – a decision described by CFO Bothwell Mazarura as a reflection of strong cash generation despite operational challenges.
While the rail line’s future remains uncertain, private sector investment could be a game-changer for Kumba, the Northern Cape, and South Africa’s broader mining logistics network. Improved rail efficiency would not only support mining exports but could also bolster investor confidence in the region’s infrastructure and economic potential.
* This article incorporates information from a Reuters report.