South Africa Government : Minister Susan Shabangu: 2013 Mccloseky Conference

Address by Ms Susan Shabangu, MP, Minister of Mineral Resources of South Africa, at the 2013 Mccloseky Conference: Cape Town

30 Jan 2013

Programme Director
Conference organisers
The leadership of the coal industry
Ladies and gentlemen.

We usually converge here, at the beginning of the year, for a lot of reasons including, among others, to reiterate our commitment back at work and to reflect both as government and the coal mining industry about how best to achieve our mutual objectives. We are under starters' orders for a massively challenging year ahead!

I have no doubt that the coal mining industry is here to share in government policy positions at this crucial period in our country. As government we look to this industry which has been in operation for more than a century to contribute meaningfully to the overall objective of building an inclusive, successful and caring society. There is no other way, as the old song goes "we are in this together". We need one another, each and every one of us.

The mining industry experienced unprecedented levels of labour unrest since the dawn of democratic rule in South Africa. All stakeholders are seized with the challenges and are working tirelessly towards an enduring solution.

Next week we will be here for the mining indaba where we will be addressing the challenges facing the mining industry in general and the following week President Zuma will outline the priorities of the government and our country in his annual state of the nation address.

So this gathering, therefore, must rightly and correctly focus on the challenges facing the coal industry. I am sure that this industry was, like the rest of the world, watching with keen interest the development of policy leading to the ANC elective conference, which reaffirmed that policies of government are correct, as there were minimal changes effected at the December conference, including putting to rest the issue of nationalisation. Mature and reflective debate is our inclusive style; and that is the reality going right back into our history.

These deliberations are not new. They have been taking place at various stages in the evolution of our organisation. Simply put, they are about the benefits that must be extended to the people of our country in general - which flow from the mining and other industries.

These debates are not unique to the South African mining jurisdiction. They are also found in countries that are bountiful in coal resources, from New South Wales to Hunters Valley in Australia, from La Guaria in Colombia to Indonesia and to Peru and Chile, and many others.     

Ours being the continent's largest and most industrialised economy places an onerous responsibility on the coal mining industry. The coal sector continues to contribute significantly to our country's economy. In 2011, we produced 252.8 million tonnes of saleable coal.

In fact, coal was the highest revenue earner, contributing 24 percent of total mining revenues, generating over R87.8 billion in earnings. This is reinforced by the fact that coal is South Africa's 4th largest mining export, generating 18 percent of foreign exchange earnings, which is in addition to being a major contributor to the tax base. Coal exports generate valuable export earnings and improve the country's trade balance.

Coal contributes 95 percent to electricity generation, 30 percent to our liquid fuel requirements and 70 percent of the country's primary energy needs. The industry remains the third largest employer, accounting for 15 percent of total mining industry employment.

As a government we are not driven only by the need to maximise profits, which is the well known forte of the private sector, whether big commercial coal companies or emerging black coal companies. We have a responsibility to the people of this country to ensure that we create and maintain a coal mining dispensation that balances these imperatives with a need to achieve a social and economic dispensation that benefits all our citizens.

Our role is akin to that of a trapeze artist. We have to bring everybody's focus to the centre in order to achieve the ideal kind of mutual benefit. Working with our sister departments such as Public Enterprises we have a regulatory responsibility to manage healthily the competition between exports and domestic coal markets. We will do this as we seek to ensure sufficient supply to both local and export markets.

The accelerated demand for coal, accompanied by an increase in international coal prices, has invariably changed the buying patterns and structure of the local coal export industry. 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.

Also, the current pricing model used for coal procured by Eskom, where the utility has to buy coal using a formula that results in higher electricity costs. This has been one of the major contributors to higher inflation over the past years, threatening investment in the economy as well as purchasing power of individuals.

Additional pressure on the availability of coal is anticipated due to expected demand growth from Eskom within the short to medium term, unless new and expansion projects, reach full development phase. 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. In the same vein, it is important that emerging black mining companies play an important role in Eskom's procurement process.

We will work together with the Minister of Public Enterprise to ensure that a significant portion of State procurement expenditure via Eskom goes to companies that, significantly, have black ownership and also a significant operational role for BEE 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.

The Government adopted the National Development Plan as a guiding principle that defined the vision of the country towards 2030 and beyond. The Plan is a blueprint document that defines the profile, character and fabric of society we aspire to achieve. In this regard, the document makes reference to, among others, coal exports being done in a sustainable manner to promote optimal utilisation of the remaining resource. I cannot emphasise enough the importance of energy security to our socio-economic development objectives, which underpin our sustainable economic growth and access to energy by ordinary South Africans.

During the tenure of a democratic Government, South Africa has achieved 82 percent in formal household electrification and 76% of all households by 2012. This is a remarkable progress in a short space of time, although more still needs to be done to ensure complete electrification of households.

We acknowledge the various complaints on energy costs that are rapidly increasing and the direct bearing on the national economic growth we seek to achieve as a country. It is necessary to balance energy cost with the need to address the historical legacy of access to electricity affordably and the economic growth prospects.

In our national energy plan, coal remains an important component of our 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 turn them into net positive opportunities for all.

We have resolved that certain minerals such as coal should be declared strategic national resources, based on the balance of evidence. However, it is always the right thing to do that the affected players work together and themselves take the initiative to reach a social, and indeed corporate, compact in the interests of SA Inc, that place we all revere - even more so when Bafana Bafana are doing well!.

On our part, we commissioned a coal resources and reserves study, which has been recently concluded by the Council for Geosciences and will be releasing the findings soon. The report has given us better insight on the extent of the potential and how we should interface the coal development with infrastructure planning mechanisms in government, which will enable the coal sector to do better. In the long term, the outcomes of the Coal Resources and Reserves study presents an opportunity for new investment and growth of this sector.

In this regard, my Department, working together with stakeholders involved in the Mining Industry Growth, Development and Employment Task Team (MIGDETT) are effectively engaged to ensure that we work towards unlocking the coal development potential and give effect to the possibilities presented by our coal resources. A task team will soon provide recommendations that will inform the strategy to place this sector on a positive growth path. Accordingly, through the identified Strategic Integrated Projects, we will explore options to unlock Waterberg coalfields through appropriate infrastructure in line with the national energy security plans.

This is over and above the infrastructure that will support the growth of the mining industry as a whole, including the coal sector. In 2011, government established the Presidential Infrastructure Coordinating Commission (PICC) to accelerate investment in social and economic infrastructure by improving coordination and integrating planning around key infrastructure projects, as well as expediting project execution; also to reaffirm the importance government ascribes to infrastructure development as a critical tool in stimulating growth, bolstering local supply industries and growing employment.

As government we also recognise that mining requires large quantities of water using current technologies. In this regard, we invite coal producers and the research community to focus on development of appropriate technology that will enable optimal exploitation of mineral resources with less water.

We cannot over-emphasise the importance of addressing the environmental legacy of coal mining which could be an albatross around the necks of future generations if nothing is done about this. In last year's address I mentioned the impact of Acid Mine Drainage to our water system, a problem which is persistent and would need collaboration from government and industry to address.

My department has been conducting inspections on some of the coal mines and have unveiled a number of other challenges that the industry needs to work on to ameliorate the impact of this sector's activities on the environment. These challenges include: There is a need to ensure that Environmental Management Programmes are dynamic, address environmental challenges effectively and are compliant to the prescripts of the law. Our inspections reveal that there are companies that encroach beyond licensed mining boundaries, map their coordinates incorrectly and extend the size of their operation without proper authorisation. This leads to insufficient financial provision being made to cater for environmental liability.

Companies that continue to carry out these practices are urged to address the issues urgently. The department's staff is always available to provide assistance to those companies. Finally, I wish you well in your deliberations at this conference and urge you to engage robustly in seeking to find the right solutions to the challenges that face the coal sector. The solutions must not be designed to only benefit one stakeholder at the expense of the other and I have every faith in the calibre of representation in this conference that you will deliver solid proposals in this regard.

I thank you.