New coal buying patterns: Shabangu

By Drum Digital
30 January 2013

An rise in the demand for coal, coupled with higher world prices, has changed the buying patterns of the local coal export industry, Mineral Resources Minister Susan Shabangu said on Wednesday.

"The emergence of the export market for lower-grade coal has presented the government with a challenge, in that it has constrained the availability of coal that was historically sold to our utility Eskom," she said in a speech prepared for delivery at the 2013 McCloskey Conference in Cape Town.

Another problem was the pricing model used for coal procured by Eskom, where it had to buy coal using a formula which resulted in higher electricity costs.

This had been a major contributor to higher inflation in past years, and threatened investment in the economy and people's purchasing power, she said.

Additional pressure on the availability of coal was anticipated because of expected demand growth from Eskom, unless new and expansion projects reached full development.

"This is important, given the role that is increasingly being played by the emerging black-owned mining companies. However, these on their own cannot muster the scale demanded by Eskom's expansion plans," she said.

It was also important that emerging black mining companies played a role in Eskom's procurement process.

Shabangu said she would work with Public Enterprises Minister Malusi Gigaba to ensure a significant portion of state procurement expenditure for Eskom went to black-owned companies.

"This is crucial in our quest to loosen the stranglehold that two or three companies have had for so long over this sector. There is, indeed, room for all if we manage our sector's affairs properly and fairly."

She acknowledged complaints about energy costs and the direct bearing it had on national economic growth. It was necessary to balance energy costs with the need to provide affordable electricity and economic growth prospects, she said.

Coal was an important component of South Africa's future energy mix and requirements.

"It is therefore paramount that we work towards a common objective, in which South Africa incorporated confronts the challenges facing the coal industry and turns them into net positive opportunities for all."

-by Sapa

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