Government will act tough if Eskom’s coal supply is threatened by exports

2013-02-03 10:00

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Government has again warned the mining sector it would not hesitate to act tough should companies place coal supplies to Eskom at risk in favour of more lucrative export markets.

This comes as the ANC listed the commodity as a strategic mineral, which may require “special public policy measures”, according to the party’s 53rd National Conference Resolutions made public on Thursday.

Among the options at its disposal, government could introduce export taxes to render exports too expensive.

Mining Minister Susan Shabangu told an industry gathering on Wednesday that rising coal prices have been a major contributing factor to higher electricity costs.

“The accelerated demand for coal, accompanied by an increase in international prices, has invariably changed the buying patterns and structure of the local coal-export industry,” Shabangu said at the McCloskey Coal Conference, in Cape Town.

“The emergence of the export market for lower-grade coal has presented government with a challenge in that it has constrained the availability of coal that was historically sold to our utility, Eskom.”

Shabangu said the role of government was to focus all the role players’ attention on achieving mutual objectives.

“I cannot emphasise enough the importance of energy security to our socioeconomic development objectives,” she said.

“We have a regulatory responsibility to manage the competition between exports and domestic coal markets.”

She said, however, that government would rather use a carrot than stick approach.

“We have resolved that certain minerals such as coal should be declared strategic national resources. However, it is always the right thing that the affected players work together and take the initiative to reach a social, and indeed corporate, compact.”

The Chamber of Mines on Thursday denied the claim that coal was the primary driver of energy costs, showing statistics that exports have remained largely static at just under 70 million tons a year for the past 10 years – with a few exceptions where exports were an even lower number.

Making presentations at the National Energy Regulator of SA’s public hearings into Eskom’s latest tariff applications, the Chamber’s coal specialist Dick Kruger said the power utility’s annual increases would have been only 3% if coal was the sole cost driver.

He also said curbs on exports and uncompetitive pricing policies for coal supplies would achieve the opposite of government’s intention to ensure security of supply, as such measures would dissuade companies from making investments in new resources.

“Demand for exports, substantial investment in infrastructure and new mines will be required to access these coal resources,” Kruger said.

“The expansion can only be achieved if an appropriate and competitive return is offered to induce the investment.”

The ANC, meanwhile, was silent over whether it would further its resolution to declare coal a strategic resource at its National Executive Committee lekgotla this weekend.

“I’m not in a position to say whether this will come up for discussion,” Enoch Godongwana, the head of the ANC’s economic transformation committee, said on Friday.

“Gwede (Mantashe, secretary general) will relay these after the lekgotla.”

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