South African Government Wants State-Owned Company to Own Coal Operations

South Africa’s government wants a state-owned mining company to have coal interests to help ensure power utility Eskom Holdings Ltd. can secure supplies of the fuel, Mineral Resources Minister Susan Shabangu said.

“Coal is a strategic asset,” Shabangu told the McCloskey South African Coal Exports Conference in Cape Town today. “We need to grow our economy, we need energy in general. It becomes important for the state to play a role there. We are looking at 18 months” to clarify the role the mining company would play.

Eskom, which generates 95 percent of power in Africa’s largest economy, has called on the government to develop a coal export policy that will guarantee it sufficient, affordable supplies as exports become more lucrative for producers. BHP Billiton Ltd., Xstrata Plc and Anglo American Plc are among the biggest coal producers in South Africa, which generates about 93 percent of its electricity from the fuel.

“It is not the government’s intention to enter the minefield of specifying all the processes and it is our fervent hope that the industry will recognize the particular challenge and work with us,” Shabangu said. “We reserve the right to take corrective measures should the situation demand it. A balance has to be found between pursuing the principles of free market while taking into account the needs of the country.”

Eskom burned 123 million metric tons of coal in its last fiscal year. Recent floods in Australia have bolstered demand for South African coal, and pushed up international coal prices.

‘Australian Misfortunes’

“Some will see an opportunity of making more money on the back of the Australian misfortunes,” Shabangu said. “That opportunity may very well be a serious threat to our supplies for electricity generation. We will be monitoring the situation closely because we will not allow a situation” that will harm the economy.

Shabangu welcomed a Jan. 31 call by BHP Billiton’s South African energy coal unit for bids to buy prospecting rights over its undeveloped reserves, saying it would help bring new investors into the industry.

South Africa is the world’s seventh biggest coal producer and the fifth biggest exporter of the fuel, government data shows. In 2009, the country produced 249 million tons of thermal coal, 74 percent of which was consumed locally, and had about 30 billion tons of reserves.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.

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