CAPE TOWN (miningweekly.com) – South Africa did not have an explicit coal policy despite its heavy dependence on the mineral, University of Cape Town Graduate School of Business’ Professor Anton Eberhard has pointed out.

Eberhard, a member of the National Planning Commission (NPC), said the other anomaly was that there was also no export strategy for coal, despite the mineral contributing heavily to export earnings.

He said that the consequence was the absence of an accurate, up-to-date picture of coal reserves.

“Hopefully the upcoming Geoscience Council statement on reserves will provide more certainty and clarify the situation,” he added.

There was no clear statement on whether or not South Africa would build more coal-fired power stations after the two that were currently being built by Eskom nor was there clarity on the building of another synfuels plant.

The country had yet to achieve the coal export levels that it achieved in 1999.

In contrast, the annual average growth in coal exports by competing countries like Indonesia and Australia made South Africa’s performance appear to be “pathetic” by comparison.

No balance had been struck around a sustainable balance in domestic coal use and exports and Eskom had been unable to sign long-term contacts for all its future coal needs, with some of its power stations competing for low-grade coal sought by India and other countries.

On the other hand, policy around climate change had been strident.

As a result, the NPC had sought to layout some preliminary objectives and perspectives on how it saw he future of coal until the key policy and investment issues were tackled.

The National Development Plan had tried to explore the future of South Africa’s mining and minerals beneficiation sector.

The mining sector generated important indirect benefits in other industries and made a major contribution to the balance of payments.

It made no sense for South Africa to discard its mineral riches and yet it also needed to become competitive in a low-carbon future, which meant there would be winners and losers among the country’s sectors, including its mining sector.

The country also needed to be mindful of the costs that were involved and the importance of maintaining a reliable power supply to grow economically.

The NPC had placed much emphasis on infrastructure provision, which it saw as being vital in the unlocking of economic growth.

Investment spending would need to begin approaching 30% of gross domestic product by 2030, up from 16% in the early 2000s.

The plan urged faster and deeper reforms in the governance of State-owned enterprises and bringing in competition in participation with the private sector.

Given the fixed investment and the low direct costs, coal would continue to be the dominant fuel for the next 20 years.

Domestic coal consumption would be influenced primarily by climate change issues and Eskom’s demand would peak in the early 2020s, but what was uncertain was the extent to which that would plateau off and the extent of building further power stations as some of the older ones are retired.

The strongest point made in the National Development Plan was that a national coal policy needed to be firmed up, that would be based on a realistic assessment of the reserve and the sustainable expansion of our coal export markets.

All that needed to be achieved within a strategic negotiated trajectory of carbon intensity, balanced against the need for economic and employment growth.

“There is no reason why our coal exports should not be 50% higher,” he said.

Earlier, the IHS McCloskey South African Coal Exports Conference heard that South Africa’s coal road map initiative was falling behind schedule.

It was going to be difficult to meet the climate-change pledges, even if there were increased use of renewables.

The fragmentation of the coal industry had had the unintended consequence of too few coal companies having the financial muscle to sign take-or-pay contracts with Transnet.

Specific planning of specific coal reserves needed to be put in place to create a balance between domestic coal consumption and the level of coal exports in order to forestall government resorting to a permit system for coal exports.

Eberhard said that it was hoped that the final plan of the 25-member NPC would be adopted in May for submission to the Cabinet.
 

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