BUSINESS
HOW GOVERNMENT
KILLS EXPORT BUSINESS
By Eamonn Ryan
Between 1999 and 2002, the South African granite quarrying industry exported just
under a million tonnes of granite blocks per annum; a volume that has since declined to
less than a third of that. The logistics of getting these products to market have negated
any benefit of a weakening rand and slightly higher granite price.
Granite blocks used to be a major export of South Africa.
T
he cost of logistics is the single
biggest cost in exporting granite,
explains Finstone SA chief
operating officer, Ian Ashmole. “Of the
price we sell for in Europe, logistics
accounts for about half of that selling
price, leaving us to recover the rest of our
operating costs from the other half. So
clearly, logistics costs are very sensitive
in our business. One of the challenges is
that when I started in this business, 99%
of our exports went to the port by rail.
Today, like the rest of the industry, most
of it is going by road.”
12_QUARRY SA| MARCH/APRIL 2019
Finstone has gone from paying USD80/m 3
20 years ago to well over USD160/m 3
today to get its product onto a vessel for
export — a doubling which does not
consider the massive weakening of the
rand, which means the local rand cost
has spiralled upwards. Ashmole notes
that the company has struggled to obtain
even a 5% increase in the dollar price of
the product in that time. This has put
pressure on margins and contributed to a
reduction in volumes exported.
“It is today on average 20% cheaper
and more reliable to move bulk materials
by road; yet, rail ought to be significantly
cheaper. The problem is that Transnet
[being a monopoly] just announces above
inflation increases of up to 10% each year,
and not just on the rail service. What
they are charging for the port service is
similarly out of line. Our Richard’s Bay
port costs are higher than we pay in most
European ports.”
Poor efficiency
Nor is the problem restricted to costs, he
notes, “but efficiency is also a problem”.
Finstone uses rail “when we have to”
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