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Editorial comment

South Africa’s new state-owned mining company, the African Exploration, Mining and Finance Corp. (AEMFC), will start producing 800,000 tpa of coal by June according to its CEO, Sizwe Madondo.

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The Vlakfontein mine, which will be built with an initial investment of US$ 18.5 million and supply coal to Eskom, the country’s state energy company, could ultimately increase production to 3 million tpa.

The establishment of the state miner last month marks a new phase in the continuing debate over the country’s energy resources. This debate has bubbled over in the past few months with Eskom accusing mining companies of favouring exports above domestic supplies.

In his speech at the company’s launch, South Africa’s President Jacob Zuma argued that “the state must actively participate in the mining industry to ensure that […] national interest is protected and advanced”. These comments were echoed by the mines minister, Susan Shabangu, who argued that South Africa could “no longer afford […] to continue to have strategic assets, such as coal, uranium, to be mined by privately owned companies. [The] Government must determine the future.”

A country is, of course, well within its rights to safeguard its energy supplies. But given that more radical elements of the ruling ANC openly call for the nationalisation of the mining industry, the establishment of AEMFC will worry private sector miners. Indeed, earlier last month, Cynthia Caroll, CEO of Anglo American, warned that mining companies will not invest if they cannot be sure that their investment is secure. Now that the state has a stake in the industry, the Government should choose its words carefully and reassure investors that its involvement in the industry will go no further.