A logistics service provider with SMME clients in the manganese mining sector has come out fighting against Transnet over hikes in container freight rates, increases that are said to be so steep it is feared that it could cause companies to close down.According to Sivi Reddy of Supply Chain Architects (SCA), the freight and rail parastatal announced towards the end of last year that there would be a series of rate increases over a three-month period effective from September 1.The announcement, SCA’s COO said, “took us all by surprise and although we can understand why there should be inf lation-related increases, increases of the magnitude they are proposing are completely irrational”.
According to Reddy, when they initially sat down to calculate the weighted cost of Transnet’s increases for the corridor SCA uses on behalf of clients in the Kalahari minerals basin, they found that it would result in an overall cost escalation of 90%.“It makes it unviable for any operation to exist or for any service to be delivered on that basis.”Such was the initial impact of the first set of increases, Reddy said, that small- to medium and micro-sized businesses relying on Transnet for freighting manganese down to the Port of Ngqura, ground to a halt.As a result SCA stepped into the breach, threatening legal action.
An early step, Reddy said, was to seek an interdict against Transnet.Thankfully that never came to pass as the state-owned enterprise (SOE) decided to hold off on the increases until the end of March.“When we initially engaged with Transnet to reason with them about the matter, their attitude was that they were moving ahead with the increases and that it was non-negotiable.“They said at the time that they reserved the right to oppose legal action should we proceed,” Reddy said.The crux of the matter, he emphasised, was that “only big miners can survive a cost escalation such as is being proposed. Smaller concerns will be forced out of business”.The very reason, Reddy said, why SCA and its clients have remained in business over the years, is because freight rates have remained more or less stable.
“The benefit that we provide is mainly based on the shipment of small parcels of manganese. The payment cycle from miner to seller and buyer can be regulated and it helps to turn cash quicker for our customers.”In comparison, large miners with consignments of 10 000 tonnes and more had their loads tied up in inventory, Reddy explained.“But allowing small parcels to go through improves access to markets for smaller miners, gives them the potential to grow, and helps them with their working capital.”That position though will become unfeasible if Transnet proceeds with the increases.