Coal Working Group

POLICY POSITION ON COAL

POLICY OBJECTIVE

To participate meaningfully in the debate on a coal policy for South Africa and to facilitate the
development of a policy that will maximise the utilisation of the country’s coal resources.

BACKGROUND

South Africa has ample resources of coal. At present the country has no policy on the utilisation of these resources.

Coal has an advantage over renewable power generation in that is not only used as a power station fuel but also to produce liquid fuels, gas and several other products.

Although the mining and utilisation of coal are regulated by different pieces of legislation along the value chain trading in coal is not regulated.

Section 17 of the National Energy Act empowers the Minister of Energy to direct any state-owned entity to acquire and maintain national strategic energy feedstocks in terms of security of supply strategies or policies. The strategies may impose obligations to supply on producers of energy feedstocks. Although this section of the Act is in force the process to develop to develop the required strategies has not yet taken place.

This means that even a strategically essential coal consumer such as Eskom must source coal on commercial terms with precarious security of supply.

The coal mining sector is, with one exception, totally privately owned. The state-owned mining company operates one small colliery.

A problem is that many of the coal Mining Rights granted by the DMR are too small to support economically viable mining operations

Coal transport by rail is done by Transnet SOC while road transport is done by privately owned contractors.

Coal transport by road is creating traffic problems as well as enormous damage to roads, especially on the Mpumalanga Highveld. Eskom is working on transporting more coal by rail to power stations but it will take time to reduce the coal tonnage on road significantly.

Of the 4 export terminals, the 2 largest are privately owned while 2 smaller ones are owned by Transnet SOC. The total terminal capacity exceeds the rail capacity significantly. RBCT has a 4 Mt/annum capacity reserved for reserved for junior miners.

The two largest coal consumers are Eskom SOC and Sasol Ltd which is privately owned.

A FFF POLICY POSITION

The envisaged policy position should address the following:

  • Should coal be declared a strategic mineral with the trade in coal being regulated to ensure a secure supply for electricity generation (there is a provision for this in the MPRDA Amendment Bill)?
  • Should the state become more involved in coal mining?
  • Should the DMR promote the consolidation of small coal producers to improve their economic viability?
  • Should the private sector be allowed to participate in bulk (coal) rail transport (Transnet SOC has in 2014 accepted a framework for private sector participation in rail transport. The Rail Transport Green Paper of 2015 also proposes opening the railway system to private operators)?
  • Should the establishment of mini inland terminals be pursued?
  • Should further terminal expansion be pursued at this time?