South Africa Calls for Coal Efficiency as $2 Billion Lost

South Africa’s coal industry needs to boost efficiency after falling coal prices cost the nation 23 billion rand ($2 billion) in lost export revenue last year, Mineral Resources Minister Ngoako Ramatlhodi said.

“We are concerned about the extreme volatility in the coal price, which has a direct effect on the profitability of companies, contribution to the fiscus, as well as implications for employment,” he told an industry conference in Cape Town.

The price of coal leaving the terminal at South Africa’s port of Richards Bay, the world’s single-largest facility for the fuel, has dropped 47 percent since the start of 2011 because of a global glut. That surplus in the seaborne variety of the commodity is poised to triple this year, according to Deutsche Bank AG. Anglo American Plc, BHP Billiton Ltd. and Glencore Plc mine the resource in Africa’s second-biggest economy.

“We need to look at cost saving measures” such as changing the shift system to keep workers employed and raising productivity by companies using more technology, Ramatlhodi said at the IHS Energy South African coal exports conference on Wednesday.

Optimum Coal

Glencore Plc’s Optimum Coal may shut some operations, affecting more than 1,000 jobs, because of “difficult market conditions and the continued deterioration in the export coal price,” the Baar, Switzerland-based company said Jan. 28.

About 80 percent of South African coal is mined in the northeastern Mpumalanga basin, a site with about 30 years of reserves left at current production rates, according to state-owned power utility Eskom Holdings SOC Ltd., which uses coal to generate about 80 percent its electricity.

While the northern Waterberg basin’s reserves may last more than 90 years at full output, they are in an environmentally sensitive area that lacks rail links to power plants.

The country has more than 66 billion metric tons of coal that can be extracted economically, needing a minimum investment of 100 billion rand for mining, infrastructure and logistics, the minister said. State-owned African Exploration Mining and Finance Corp., already developing coal, “will be augmenting its portfolio to contribute towards greater security of supply,” he said, without elaborating.

Mining companies operating in South Africa need to reserve a 26 percent stake for so-called black economic empowerment, in line with government regulations seeking to help make up for the discrimination against non-white South Africans in the economy before the end of apartheid in 1994.

Ramatlhodi said he doesn’t “intend to increase” the requirement, but encourages black ownership in mining.

Before it's here, it's on the Bloomberg Terminal.