coal mining: Eskom pushes for black ownership

Could coal become a “national asset”….

coal miningMinister Gigaba of public enterprises has made of number of interesting comments on coal mining in recent weeks regarding coal resources generally, stating in a public interview before the Manguang conference that declaring coal a national asset might be a possibility.

This could in turn, he said, be a precursor to imposing levies on exports, thus providing greater incentives to supplying coal to Eskom.  Gigaba also said that integrating emerging miners – which he wanted to see as defined as those with a 50%-plus-one-share black ownership – into the state utility’s supply base and this would assist in bringing black transformation in the coal industry to a new level.

Eskom itself told parliamentarians at the end of 2012 that it currently buys 130m tons of the 250m tons of coal produced a year in South Africa for use in its 13 power stations.

Eskom could focus on emergent suppliers

As the ANC conference at the end of last year went into gear, the issue of black participation in the coal mining industry arose when Gigaba stated that a request might come from Eskom to specifically assist in arrangements for coal supply from emerging black miners.

Gigaba said at the time that that coal production was currently concentrated in large mines with eight mines currently supplying 61% of the output. Engineering News commented on this remark quoting that there are 33 black economically-empowered (BEE) coal mines in South Africa if one used the definition of 26% black ownership. However, if one measured using minister Gigaba’s hoped for 50%-plus-one-share definition, the number would be negligible.

Levies not wanted

The question of levies on exports has not been debated in Parliament, only commented upon, but newspaper reports indicate that larger coal producers have complained, as one did publicly, that “any export levies would constrain their ability to invest in new coal mines as well as undermine efforts to improve infrastructure”.

Eskom says in its annual report  that it has contracted out 80% of its coal supplies to 2018 but beyond that there would have to be significant investment in coal mining by industry to meet future demand. It also says it has been working for the past few years to develop a long-term coal supply strategy which would ensure a secure supply of coal in the right volumes, at the right quality and at costs that South Africa could afford.

Eskom walks the talk

This was accompanied by a statement that Eskom was committed to ensuring that its procurement was accompanied by the emergence of black players into the industry. In a resultant conference held by Eskom with some 500 smaller miners and black entrepreneurial parties, Eskom told attending delegates “it would use its purchasing power to empower black-owned suppliers and increase equity stakes to 50% plus one share.”

Speakers also stated that “commercially acceptable levers would be used to increase black ownership.” Participation in discussion with established industry players, they said, had been achieved successfully in a case with Anglo American and BHP Billiton, resulting finally in one such a black owned mining venture, it was noted.

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