On Monday, South African parastatal, Eskom, announced that its coal procurement policy requires all the mines that supply coal to its power stations to have a black ownership target of more than 50% throughout the life of the mine.
The utility notes media reports that Exxaro’s black shareholding could be reduced to about 30% following the expiry of an agreement with its BEE partners. Eskom will soon ask for a meeting with Exxaro in an effort to understand how they plan to comply with the 50%-plus policy requirements.
Coal suppliers receive support
As part of economic transformation, Eskom partnered with the Departments of Mineral Resources and Public Enterprises in December 2012 in the development of the Black Emerging Miner (BEM) Strategy.
The utility expalined in a statement that this strategy has been largely successful, with coal from BEMs increasing from ZAR1.7 billion ($145 million) in 2012 to ZAR6.9 billion ($508 million) – amounting to 6% in 2012 and 18% in 2015 respectively – and is projected to rise to R14 billion ($1 billion) in 2020.
Eskom’s Interim Group Chief Executive Matshela Koko said Eskom’s policy of sourcing coal from majority black-owned suppliers is a thorn on the side of many of the company’s main coal suppliers.
These suppliers subscribe to a “once empowered always empowered” principle, and a black ownership target of 26% rather than a minimum of 50% black ownership.
“What is actually happening is that the ongoing legacy of the pre-1994 economy is being confronted by the Eskom leadership. This is the legacy that we have not worked hard enough to dismantle, and at times have been frightened to confront. Eskom has resolved to do something radically different.”
Coal key baseload power for SA
Eskom explained that whilst pursuing these transformation objectives within the coal supply industry, the security of coal supply to Eskom power stations cannot be compromised.
The coal qualities must remain within specifications and the cost must be within the range prescribed by the National Energy Regulator of South Africa (Nersa).
Coal is the lifeblood of the South African economy. It is the predominant fuel source for electricity, providing the bulk of the country’s energy needs. Without coal-derived electricity, industries such as manufacturing, financial services, and social services would be severely crippled, an estimated 430,000 people would be without work or financial means, and the country would stop growing. South Africa, therefore, needs coal to ensure that the economy continues to grow as it diversifies its energy mix into the future.
South Africa generally has lower coal costs due to its high local availability, the utility noted.
This has enabled lower overall generation costs and contributed to South Africa having one of the cheapest electricity price tariffs globally.
A 2014 survey that was conducted by the US-based NUS Consulting showed that South Africa’s electricity prices, at $0.09c/kWh, were the fourth lowest among the 18 countries monitored.