HomeIndustry SectorsFinance and PolicyEnergy demand drives coal mining in South Africa

Energy demand drives coal mining in South Africa

The rising global and regional demand for energy, along with escalating coal prices and abundant coal reserves, will spur the implementation of coal expansion projects in southern Africa. In 2012, there were a total of 53 coal expansion projects collectively worth US$45.58 billion in the region. Coal accounts for a significant share of southern Africa’s primary energy needs. A large portion of its coal production is also sold to international markets in Europe, India and China.

Analysis from Frost & Sullivan finds that coal production in the region stood at 266.1 million tonnes in 2012 and estimates this to reach 308 million tonnes by 2018. South Africa is the largest producer of coal in southern Africa while Zimbabwe and Botswana stand second and third respectively.

Despite environmental concerns, coal continues to play an important part in the energy mix of many countries, which use it for electricity generation and as feedstock for synthetic fuels and steel manufacturing. In fact, coal is expected to account for nearly 69% of the total global energy consumption in 2030.

“As the market grows, South Africa is poised to consolidate its lead as the largest coal producer in Southern Africa despite the depletion of the country’s Witbank, Ermelo, and Highveld coal mines,” Frost & Sullivan mining analyst Wonder Nyanjowa, says.

“Mozambique is likely to overtake Zimbabwe as the region’s second largest coal producer. Large-scale coal development projects, coupled with the upgrading of ports and railway infrastructure, will sharply increase the country’s coal production.”

However, mining companies in these countries are currently operating at sub-optimal production levels due to the unavailability of power. Electricity supply in southern Africa is expected to remain constrained due to the lack of investments in electricity generation infrastructure, project delays, and long lead periods between the construction and commissioning of new power plants. Partnering with the government to set up electricity infrastructure will ensure that coal mines remain competitive within the region’s mining industry.

The migration of engineering professionals to other resource rich economies, such as Australia and Canada due to higher compensation and safer operating environments, has created a shortage of skilled engineers, geologists, technicians and boiler makers, further crippling the industry. Mining companies could raise the compensation packages for engineering professionals to retain them, though this will increase operational costs and reduce profits. Legislative support from the government to tackle issues, such as mine related health and safety as well as environmental concerns, will help the industry in the long term.