Contrary to some analysts, new black owners of coal mining assets have made sound investment decisions, as South Africa needs coal power generation. Coal remains the base-load resource – a situation which is likely to remain like that in the foreseeable future.
It is hard to fail to notice the trend of international coal mining companies divesting from South Africa, and new majority-black owned, or wholly-black owned consortiums, buying their assets seemingly without a second thought. Some analysts have questioned the wisdom of the move by the latter, with fears that they could be buying assets that discerning previous owners foresee no medium or long-term value. Taking a dim view, they refer to the global campaign transition from fossil to clean energy that the Joe Biden Presidency has thrown its weight behind , as a death knell for new investment in coal mining.
Nonetheless, those fears could be grossly exaggerated with regard to South Africa. Statistics suggest that coal will still be central to the country’s energy source mix. The Integrated Resource Plan, which was released in 2019, projects that, in 2030, almost 60% of South Africa’s electricity will be sourced from thermal coal. Currently, 69% is generated from power. This means coal will still remain a base-load resource, over half of power will need a steady supply of thermal from mines.
Until President Cyril Ramaphosa’s recent intervention, South Africa’s efforts to ‘clean’ its energy mix had been hindered by unnecessary red tape in granting licences to independent power producers (IPP) for wind, solar and other renewables. This may result in the threshold of renewables in the energy mix not being met, rendering the projected reduction of dependency on coal to 61% as farfetched and fanciful.
Furthermore, globally, voices from picketing environmental activists calling on countries to dump fossil fuels have reached fever pitch. However, the reality is that the transition to so-called cleaner energy sources will be a laborious process and not an event. It is not akin to the simply effort switching on a light, and, bingo, the world would be a better place, free of fossils.
In a nutshell, as demonstrated, new black-owners of coal mining assets have made sound investment decisions, as South Africa needs coal power generation. They will be in the money, as long as coal remains the base-load resource. This situation is likely to remain like that in the foreseeable future.
New black-owned companies that have emerged from most recent acquisitions include Thungela Resources (an offshoot of Anglo American), Seriti Resources (South32) and Overlooked Colliery (Exxaro).
