Transnet declares sixth force majeure in 18 months

11th November 2022

By: News24Wire


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Transnet has declared its sixth force majeure in 18 months, this time on the coal export line to Richards Bay, which experienced a massive derailment on Tuesday. 

Force majeure is a clause that is included in contracts when a party cannot fulfil its obligations owing to an unforeseeable and unavoidable catastrophe. Typically, these are "acts of God", such as extreme weather. 

However, Transnet broadly defines force majeure, including events that are "beyond its reasonable control." It has declared force majeure six times since July 2021 for parts of business due to a cyberattack, riots, a fire, floods, a strike and now the derailment. 

The derailment occurred in rural KwaZulu-Natal near Ulundi and included 97 of 100 wagons, necessitating the closure of both coal lines. A large piece of the track was also damaged. In a statement earlier this week, Transnet said that it was investigating the cause of the accident, but that sabotage was suspected as it had received threats from the surrounding community, demanding business opportunities. 

In terms of the agreements that Transnet has with users of the export coal line, Transnet is required to transport a minimum contracted tonnage of coal or face financial penalties.

Following the derailment, Transnet notified Coal Export Parties and advised that it was prevented from or may be delayed in performing any of its obligations under their agreement. In a letter to users, it said: 

Clause 1.2.42 of the agreement records that in the event of any party being unable to perform any of its obligations under the agreement as a result of force majeure, such party shall be relieved from all liability that such delay or inability would ordinarily occasion under the agreement, for the period of the delay or inability, provided that, if a party is delayed or is unable to perform its obligations by virtue of a force majeure event, it shall immediately perform the relevant obligation as soon as it is able to do so.

Under the contracted arrangements, Transnet Freight Rail committed to delivering 60mt during the 2022/23 financial year and is lagging behind to meet this target. The company has yet to say how long it will take to clear the derailment and restart operations. 

The company is under financial strain as revenues have fallen every year since 2018 as it struggles to deliver sufficient volumes. In October it received R5.9 billion of support from the Treasury to repair and buy more locomotives and repair flood damage. 

Edited by News24Wire



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