African allure for the IDC

Johannesburg - The Industrial Development Corporation expects to spend more of its allocation outside South Africa as the power shortage bites deep into projects, said Abel Malinga, head of the mining and beneficiation division of the state-owned funder.

The budget for the current financial year to end-March 2009 is R2.2bn. It has already been allocated, Malinga told Miningmx in an interview.

There are several large projects in South Africa for which companies had already agreed electricity deals with state-owned power utility Eskom and it was in these the IDC had invested, he said.

"Next year and in the year after that there are not that many big mining projects in South Africa, and our allocation might be split 50-50 between South Africa and the rest of Africa," Malinga said. The normal split is 60-40.

African investments had performed well for the IDC, he said.

"They've made very good returns," he said of the investments largely in base metals which bring associated infrastructure projects like road, rail, power and water to extract and transport the bulk commodities. This benefits communities in the relevant countries, an important criterium for the IDC.

Opportunities beckon

Despite the breath-taking drop in a wide range of commodity prices and the shares of the companies that produce them, there is still a lot of opportunity for funders like the IDC.

"I don't foresee any struggle in investing next year's R3bn if I look at the project pipeline," Malinga said.

"If there is a resolution to the Zimbabwe situation there will be much greater demand for our funding, because there is just so much low-hanging fruit there."

The IDC is keen to be involved in Sasol's Mafutha project to build an 80 000 barrel per day coal-to-liquid fuel plant.

New Sasol plant

This not only has positive implications for the country, lessening its dependency on imported oil, but will also bring development and infrastructure to a poor part of the country.

Sasol is investigating building the plant in Limpopo, where there are large coal fields and also the possibility of using methane in that coal as a feedstock for the project.

Malinga raised the prospect of the IDC becoming involved in the funding of increased rail capacity between the Waterberg coal fields and the main rail link to the Richards Bay coal terminal. A rail line exists, but it doesn't have enough rolling stock or capacity to handle large exports.

"If there is a public-private partnership on that railway line and it is partially privatised, then it's possible that we would become involved. We are looking keenly at the Waterberg," he said.

The rail link would not only facilitate exports, but also ultimately supply coal to the half dozen or so power stations in Mpumalanga once its coalfields are depleted.

- Miningmx.com

For more mining sector coverage, visit miningmx.com.