Limpopo goes it alone on nationalisation

2012-01-14 10:02

A deal with Coal India this week has revealed that the Limpopo government is investing heavily in the mining industry – ahead of final discussions on nationalisation by the ANC at the end of January.

It was revealed this week that Limpopo’s own state-owned mining company, Corridor Mineral Resources (CMR) – a wholly-owned subsidiary of Limpopo Economic Development Enterprise – has entered into a massive joint venture with Coal India to develop new coal mines in the province.

Five Limpopo departments were recently placed under national government administration and the fiscus is unable to pay its service providers.

The Indian mining deal was put together over the past two years with Premier Cassel Mathale leading the charge, holding several high-level talks with the Indians.

Mathale said the investment would boost job creation in Limpopo.

But commentators say the deals expose the practical contradictions of a state role in mining, especially on water utilisation, which is a huge issue in the province.

Mathale is an outspoken supporter of the nationalisation of the mines, and previously spoke in support of ANC Youth League leader Julius Malema’s pro-nationalisation demands.

“We have always believed that the mineral wealth beneath our soil is the national heritage of our people.

They must enjoy direct benefit of all mining proceeds,” Mathale said at the ANC’s Limpopo conference in December.

Coal India has reportedly put together a war chest of about R9?billion for new investments.

The company produces 80% of India’s coal, and is under pressure to deliver coal to feed 20 new coal-fired power stations being built in India.

Trade and Investment Limpopo chief executive Motalane Monakedi, involved in setting up the deal, said CMR was already sniffing around potential licence holders, because it had no coal-prospecting licences.

New coal mines in Limpopo have a big problem: water. There simply is not enough to go around, rendering many of the licences useless.

Monakedi was not deterred by the looming environmental problems.

“We are actively looking for people with prospecting rights to invest in the joint venture,” he said. “We have got one interested investor.”

He confirmed the Soutpansberg was one of the areas the joint venture was investigating.

Most Greenfield coal reserves are in the Soutpansberg, which has the rainfall of the Kalahari.

Most of the Soutpansberg’s coal licences had been allocated, but it is simply not feasible to mine as Coal of Africa’s startup mine Makhado found out.

Coal of Africa’s Vele mine gets most of its water from the already overcommitted Limpopo river.

Mining and prospecting licence- holders could make a killing if their rights were bought out by the Limpopo-Coal India venture. To acquire a prospecting licence is free, except for the registration fee of R500.

“This could potentially end in a killing for the current rights holder,” said Koos Pretorius, director of the Federation for a Sustainable Environment.

“There is no water in the Soutpansberg to mine the coal with. If you want water to mine you will have to take away water from the current users,” he said.

Pretorius cautioned that even without CMR sticking its nose into the Soutpansberg, a huge fight was looming over the water rights.

“You can imagine what will happen if a private mine’s water licences is rejected, and the state-owned mining company applies and it is granted.

It is a clear conflict of interest,” he said. “It simply can’t work.”

Monakedi said Limpopo’s state mining company CMR was drawn into the fray because Coal India wanted to partner with a mining company owned by the government.

According to its mandate, CMR must develop mining assets and focus on mining and mining-related activities. Two years ago its interests were still small and mostly centred on chrome and platinum mines.

In 2010 it took a sudden interest in coal mining, when Mathale lined up the Chinese for a deal with CMR.

CMR signed a memorandum of understanding with representatives of the China Coal Technology and Engineering Group and the universities of Limpopo and Venda, also to develop coal mines for the Chinese.

It is unclear what the status of this deal is.

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