Time To Score

Is the African National Congress (ANC) planning to publicly knock its Youth League leader’s, Julius Malema’s, proposals for nationalisation on the head once and for all? And if it does, what will the industry, and potential investors, make of what they say?

Opportunities and opportunists

Recent articles have convincingly argued, not against what is termed Black Economic Empowerment (BEE), but that it is not being played on a level playing field. Since the mining charter of 2004 and the transfer of mining rights to the state, the industry has, overall, supported the entry of previously disadvantaged would-be entrepreneurs to the industry.

Throughout the entire industry, established producers have identified, created, nurtured and assisted credible entrepreneurs to fund equity participation in their companies and reach the Government set and industry agreed target of 26% ownership of the industry by BEE entities by 2014.

There have also been opportunists. Some BEE groups and individuals have obtained equity in a company, more often than not backed by the existing shareholders of the company, only to soon sell their interest in it and pocket the proceeds. Now apparently, says minister of mining, Susan Shabangu, such companies will have to find new BEE partners and be empowered again.

Union viewpoint

Malema wants the effective nationalisation of the industry through a state-mining company that would hold 60% of the equity of all existing and new producers. The National Union of Mineworkers (NUM) says it would settle for 31% with worker cooperatives getting a further 20%. It does not care who owns the remaining 49% – foreigner, citizen, black or white. Neither Malema nor the NUM appear to have tackled the question of how 60% – or 31% – of the mining companies’ shares would get into the hands of the state mining company, nor how the workers get their hands on 20%.

Indians bail out South African miners

Indian utilities continue to look for cheaper South African coal for new power plants on the west coast of the country. Two energy groups – JSW and GMR – have bailed out ailing South African juniors in efforts to secure supplies.

 JSW is now the controlling shareholder in South African Coal Mining Holdings (SACMH) and GMR Energy is in efforts to bail out Toronto-listed South African junior Homeland Energy.

Outlook remains positive

Overall, South African mining production last month showed the highest growth rate since March 2004, Statistics South Africa reports. Quarter-on-quarter production in the coal sector increased 1.8%. Investec merchant bank economist, Kgotso Radira, said that the outlook for mining production for South Africa remained positive on the back of rising commodity prices, but the strength of the rand remained a major risk to growth.

Sales to China are rebounding strongly as utilities on its west coast look to take advantage of falling freight rates out of Richards Bay, reported to be below US$ 16/t. The country’s coal imports could rise by over 70% in 2010 to 170 million t due to power demand growth in the key coastal regions, the International Energy Agency said in May.

Author: Barry Baxter

You can read the full article in the August issue of World Coal magazine.
Subscribers can login here to download the issue.

Read the article online at: https://www.worldcoal.com/coal/11082010/time_to_score/