Eskom bonus for black mining firms

2012-12-16 14:27

Johannesburg - Black mining companies hit pay dirt this week when Eskom announced a new policy to source coal from the Waterberg in Limpopo. And to qualify, companies must be majority black.

The contract will boost black mining power while the coal rush will boost development in the region. The power utility, together with the public enterprises department, announced earlier this week it would contract the supply of more than 1.3?billion tonnes of coal from black-controlled mining firms over the next four decades.

The criterion for qualifying companies is black ownership of 50% plus one vote, almost double the existing Mining Charter’s black ownership criterion of 26%.

Eskom currently spends R28bn per year on sourcing coal, of which R19bn goes towards existing mining houses such as Anglo American [JSE:AGL], BHP Billiton [JSE:BIL], Xstrata and Exxaro Resources [JSE:EXX], which is already under black control.

As for emerging black-controlled companies, their existing slice of the pie is R2bn.

The utility has already secured more than 80% of its coal needs until 2018, and has a shortage of 2.1?billion tonnes for the period after that, until 2049.

Eskom chief executive, Brian Dames, confirmed this and said: “We have a shortfall, particularly from 2018 onwards, that is significant. That provides a significant opportunity for us to see to the development and transformation of the mining industry.”

The strategy would, however, require the opening up of the Waterberg coalfields, an area in the west of Limpopo that houses more than 50% of South Africa’s coal reserves. The potential of the area has been known for decades, but has largely remained undeveloped due to a lack of rail infrastructure and water shortages.

Dames further said: “We will have to look at opening up new coalfields in the country, in particular the Waterberg coalfields, and when it gets done we have to ask how we can shape an industry that is representative of the aspirations we have as a country.”

The majority of coal in South Africa is mined in Mpumalanga and northern KwaZulu-Natal, regions whose resources are nearing depletion.

Consolidation of smaller players

Part of the strategy would entail the creation of a mine development fund for the capital needs of emerging miners, while the power utility would also assist in the consolidation of smaller, black-owned mining resources.

Beneficiaries would also have to commit to supplying Eskom with coal at so-called developmental prices, as opposed to higher prices paid by foreign customers.

Eskom said: “It (the strategy) seeks a framework which will balance the need for domestic security of coal supply with the need for the coal-export industry to thrive.”

A number of black-controlled companies already own the mineral rights to significant coal deposits in the Waterberg.

Exxaro Resources, which operates Grootegeluk Colliery (the sole existing coal mine in the region) is 52% owned by a BEE consortium, which includes the group’s CEO Sipho Nkosi.

Located near Grootegeluk are properties owned by Sekoko Resources and its Australian-listed partner, Firestone Energy.

The partners are in the planning stages of building a mine, and earlier this year signed a memorandum of understanding with Eskom to supply the utility with 10?million tonnes per year, for 30 years, from 2019.

For Timothy Tebeila, the chairperson of both Sekoko and Firestone, Eskom’s announcement came “as music to (his) ears”.

He said: “The only issue we really need to sort out is around water. With Eskom on board it can help us put everything together.”

Sekoko owns a second tenement where exploration work is currently ongoing. “We’re expecting to advance that project next year,” said Tebeila.

Namane Resources, a black-controlled entity founded by well-known entrepreneur Anna Mokgokong, also owns a property in the region through its subsidiary, Timo Coal.

Timo’s operational head, John Schoeman, said: “We like Eskom’s initiative and we’re already positioning ourselves to benefit from that.”

Elsewhere in the Waterberg, Australian and Johannesburg Stock Exchange-listed company Resource Generation is due to start developing its Boikarabelo coal mine early next year.

The company boasts a 26% BEE stakeholding through Fairy Wing Trading 136, an entity that includes among its directors Debbie Ntombela, a former chief director of mining regulation at the mineral resources department.

The group’s initial production is mostly destined for exports.

Shanduka Coal, which is part of Cyril Ramaphosa’s Shanduka Group, also trades in the coal space, although its properties are mostly based in Mpumalanga.

The chairperson of the SA Mining Development Association, Peter Temane, said assistance with the consolidation of smaller mines would go a long way towards helping emerging miners compete with established miners on even footing.

He said: “Where you have three or four small mines near each other, you may now see that they’ll share the cost of a washing plant, for instance.”

Temane said the creation of a new funding mechanism was also necessary to bring more black miners into the industry, as most new entrants sell their prospecting rights to established players due to a lack of development capital.


  • croix.mactee - 2012-12-16 14:31

    Howzit Zimbabwe!

      ianon.ym - 2012-12-16 14:49

      A form of Nationalization under the disguise of 'Majority Black Ownership'

      pdvermaak - 2012-12-16 15:18

      This will not hold, it will fold sooner than later, then we are a huge step closer to Zim, what our goverment so badly want. FACEPALM.

      robes.spear - 2012-12-16 18:49

      This is blatant racism and the introduction of economic apartheid against whites. If this succeeds in principle it will be applied to every government and corporate tender and it needs to be fought at every level.

      mathata.fela.7 - 2012-12-17 06:40

      We must also eat and our leaders must eat.

      wesley.nel.5 - 2012-12-17 07:55

      Did they forget what happen in 2008, all the blackouts were because of low coal stockpiles, the bee suppliers could not supply more that 5 bags of coal per day. All the could fit on the transport, old datsun 1400 bakkie

  • SarelJBotha - 2012-12-16 14:35

    The result of this will be even higher electricity prices.

      zapadela.tistarocha - 2012-12-16 15:51

      Possibly nay...definitely if one accommodates whats currently going on in the world regarding the pricing of Energy.

  • mikeangell61 - 2012-12-16 14:37

    Are the black consumers going to PAY for the electricity????

      zapadela.tistarocha - 2012-12-16 15:49

      Yes , we do currently and even in the past. We even paid tax to a regime for little gains.....

      mark.barker.370 - 2012-12-16 16:51

      @ Zapdela - fact is black consumers don't pay for electricity , they get favorable tarrifs and these they dont even pay. Fact is Soweto owes billions of rands

  • jesibelle.krueger - 2012-12-16 14:40

    "...Mining firm must now be more than 50% black-owned..." Iow it must follow the Aurora business model... Soon SA will not only have the most expensive electricity in the world - it will have no electricity at all - Eskom will encounter such massive supply problems it will find it impossible to operate and/or the poor management of suppliers will make cost skyrocket even further.

      zapadela.tistarocha - 2012-12-16 15:48

      We pay on average a third of what the EU charges, have a look.

      Bob - 2012-12-16 21:05

      Zapadela, as far as I can see those prices aren't adjusted for things like PPP and electricity subsidies. If such a validation is correct, it means that comparing those prices is at best entirely misleading.

      timothy.tanzer.5 - 2013-01-30 14:55

      @zapadela why do you defend this so vehemently... do you agree with our electricity prices? food prices? is it your wish for people to have poor standards of living and have very little in the townships? it sounds like you want people to stay poor and in townships? shouldnt you be supporting the freeing of minerals and energy resources for the betterment of all South Africans. You come across as one of them.... unlike you I disagree with our expensive electricity and food... it does not benefit the poor of this country, yet you want them to starve, because that is what you are really saying in all of your comments.

  • marius.fourie.526 - 2012-12-16 14:50

    I couldn't care if the companies are black pink purple or blue owned. The question is will it be properly manage so that the coal reaches Eskom so that we will have power or will we have to get a sub sub contractor to fix the f#$% up at triple the price that we have to pay for?

  • marc.schnehage - 2012-12-16 14:51

    Eskom will run out of coal very shortly!

  • Justin - 2012-12-16 14:52

    How stupid, assuming that meet other targets some coal companies will just export all their production, as they get a better price in the export market anyway, perhaps I am missing something.

      zapadela.tistarocha - 2012-12-16 15:06

      Yes , ypu are missing something, The exportation of Coal from RSA is now regulated , this was adopted since the 2008 rolling blackouts due to the RSA entrepreneurs selling Coal to Europe for profits even though they knew RSA didn't have enough. This can no longer take place,,,Hopefully I have answered your comment.

      timothy.tanzer.5 - 2013-01-30 15:05

      @zapadela you are clueless. we are one of the top 5 coal exporters in the world and one of our greatest sources of foreign exchange. Most of our coal is not exported to Europe. Also rolling blackouts were due to excedance of demand mainly, later due to coal supply demand to power stations not being met by BEE deals. I wouldnt expect an American to know much about this..

  • Charles Frederik Robberts - 2012-12-16 14:57

    Another industry going to the pits!

      zapadela.tistarocha - 2012-12-16 15:07

      Yes we are off to the Coal pits for product.

  • bernpm - 2012-12-16 15:00

    Why would Eskom, which can barely meet the demand for power, put silly (=non business related) restrictions on the suppliers of one of the basic materials for production of power???? Are they trying to create this potential shortfall of coal to argue in favour of Nuclear???? Are bribery opportunities in nuclear business (foreign contractors) better than in the coal supply by black owned, SA based, mining comapnies???

  • zapadela.tistarocha - 2012-12-16 15:04

    If Fraternities do not want to toe the line then rules such as these will be installed to ensure Transformation goals and parameters.

      Bob - 2012-12-16 15:53

      Transformation, empowerment or whatever you like to call it: makes businesses run inefficiently (since HR is filling positions with sub-par individuals), is open to corruption, benefits only a few, conveys the message that blacks need artificial structures to be able to compete with whites (therefore, are seen as inferior) and is a way of forcing blacks through the system when they're not ready for the jobs they get. Is this really the kind of approach to equality that you support?

      mandla.thwala.10 - 2012-12-16 16:00

      I agree but what about capacity building,the ability to honour contracts by the majority of citizens of this country,will that not lead us to the shortage of coal when those miners fail to deliver coal when needs it?

      julio.sanfona - 2012-12-16 16:18

      I don't know what you mean by "fraternities". I can only guess that are insinuating that the established companies, which are probably mostly white owned and run, are all in cahoots to keep blacks out. Business is not a club where one group gangs up against another racial group. Successful economies run on pure competition where one company competes against another based on the quality, efficiency and cost effectiveness of their product or service. What the losing competitor has to do is go back to basics and jack their service so that the next time they can get the contract. This is what we need to do so that the whole society will benefit and not favour anyone purely because of the colour of their skin. The fact that this was done during white rule and was morally wrong doesn't make it right in the current regime.

      zapadela.tistarocha - 2012-12-16 16:24

      Bob, Transformation, empowerment or whatever you like to call it: makes businesses run inefficiently (since HR is filling positions with sub-par individuals), is open to corruption, benefits only a few, "" So all Blacks fall in this category, At my very employment , I could point out imbeciles and criminals in all shades of Brown from pale as to obsidian. """conveys the message that blacks need artificial structures to be able to compete with whites (therefore, are seen as inferior) and is a way of forcing blacks through the system when they're not ready for the jobs they get.""" Why Apartheid then ??? Laws today are to redress the balance and is in no way, shape or form similar to Apartheid. """Is this really the kind of approach to equality that you support?""" Whats the alternatives take all teh wealth of RSA and divide it equally among it's citizens ???.......NO. Maybe you have an alternate to addressing our history ???

      gwilym.howes - 2012-12-16 16:59

      These 'transformation goals and parameters' are RACISM, plain and simple. Funny when we call it BEE or AA, A""holes like you can't see that!

      Bob - 2012-12-16 20:48

      Zapadela, education and cultural change is the answer. An educated individual has the credentials to garner a successful career and the culture of hand-outs needs to be replaced with a sense of accountability for one's own successes and failures. If people are going to be spoon-fed using AA/BEE then how can we ever expect them to take responsibility for their own lives?

      zapadela.tistarocha - 2012-12-17 11:04

      Bob, You were inferior before 1994 ???

  • flysouth - 2012-12-16 15:05

    An entity like Eskom, deep in the dwang over deliberate lack of investment in infrastructure and virtually riding a knife edge in terms of adequate supply of it's product, has no business meddling in 'transformation' to this extent. It needs to adopt one of the first principles of business 'stick to the knitting' - which is making electricity at a competitive price.

      zapadela.tistarocha - 2012-12-16 15:45

      Practically every country has issues over Power generation and consumption, This si not an RSA phenomenon.

  • tiaan.dippenaar.1 - 2012-12-16 15:12

    We should just build 2 more nuclear power stations and get it done with.

      kortbroek.duplessis - 2012-12-16 15:19

      I am thinking government run hospital, and then thinking government run nuclear power station. Not a good idea

      zapadela.tistarocha - 2012-12-16 15:43

      Who do think operates Koeberg ???

      Bob - 2012-12-16 21:09

      Good idea... they'll only cost something ridiculous like R50 bil. per plant!

      timothy.tanzer.5 - 2013-01-30 15:10

      @zapadela Koeberg is a system balance. does not actual provide any power to RSA. Building more Nuclear stations would. The truth is we should be building gas power stations. btw... the new coal power station being built by Eskom/Government is so corrupt contract wise that when it is operating it will never ever pay for itself in electricity generation. It is 35 times per kW more expensive than any other power station in the world.

  • bob.small.7547 - 2012-12-16 15:22

    Right way to screw up the coal supply and right way to bankrupt a few coal mines and coal suppliers...! Pathetic!

  • Michael Kleber - 2012-12-16 15:25

    as long as they can deliver and their prices are competitive

      Bob - 2012-12-16 20:36

      Their prices haven't been competitive for at least 5 years.

  • ana.curcic - 2012-12-16 15:37

    Damn...cANCcer is beter at disquise than Napolen, Hitler, Stalin, Gadafi, Mubarak, Idi Amin............hells bells, we are domed to eternity if this rot is not stoped.

  • mandla.thwala.10 - 2012-12-16 15:41

    I think we should find ways of dealing with concerns of white peaple of this country,I think I shere their concerns but dont agree with them entirelly on other issues, In terms of capacity blacks are still far behind,now it would be very difficult for black miners to honour their contracts with Eskom,and that can lead to the shortage of coal going foward.

      zapadela.tistarocha - 2012-12-16 16:02

      Yee have little faith in your fellow brethren........ Do you think Dubai looks like it is because of it's people ??? They buy the technology and Staff to complete the task. Why would that not work here whilst the youngens learn and eventually operate it with the lessons learn't ??

      Bob - 2012-12-16 16:03

      Yeah the main reason for all that load shedding we've seen over the last few years is that they ditched major coal companies in favor of BEE coal businesses and had major shortages ever since. Meddling as such in the labour market with BEE etc. deepens racial tensions and doesn't achieve its goals. The correct approach is to focus on educating the masses and eliminating this culture of being given everything for nothing. Achieve those 2 goals and everything else will start falling into place. No need for BEE. You can't rush transformation.

      zapadela.tistarocha - 2012-12-16 16:26

      Bob, I would have transformed this country sooner, You should be thankful this Government is too scared to accelerate transformation.

      Bob - 2012-12-16 20:35

      And how would you do that Zapadela?

  • Kykweer - 2012-12-16 15:54

    I'm devastated... so we are STILL going to use coal till atleast 2048? 36 years from now... Really, Eskom keeps dragging its feet with these windfarms... We will only use clean energy after we have destroyed the world...

      Bob - 2012-12-16 16:10

      Air pollution? Psh... Over-population does far more damage then any other environmental phenomenon. Problem is, implementing population controls on humans like you would with other animals wouldn't go down very well with the general public.

      roman.caesar.121 - 2012-12-16 16:11

      windfarms starting next yr< dont you read????

      Jimmy NZ - 2012-12-16 16:26

      Bro, SA will be like Zimbabwe in the next 10, and worse yet to come... yoh, yoh, yoh!

      zapadela.tistarocha - 2012-12-16 16:27

      2048, So will 90% of the Planet.......

      Kykweer - 2012-12-17 02:57

      Air pollution, water pollution, soil pollution... Take your pick. Over population is nothing, population can be maintained by education and good infrastructure, japan is much more densely populated that us but they manage. Eskom is dragging its feet with the windfarms, it should have started this year already, but exaro and the other big wigs will help delay it as long as possible.

      timothy.tanzer.5 - 2013-01-30 15:13

      @kykweer if you think windfarms are the answer you are mistaken. when the wind does not blow how do you think we get power???? magic? actually the coal stations still operate while the wind turbine are running because it is too expensive to switch a turbine on and off. wind turbines actually equal minus energy capacity gains because they always have to be backed by coal / gas or nuclear power. also industry requires large consistent power supplies.

  • makarapakaplan - 2012-12-16 16:01

    Ok so some clever white Owens will be fronting BEE and every ones wins!

  • julio.sanfona - 2012-12-16 16:03

    Take note "The criterion for qualifying companies is black ownership of 50% plus one vote" You don't need to prove that you can deliver on time and be cost effective, as long as you're black! Watch these guys all go on some sort of strike to demand better treatment and then watch Eskom put up the rates again and again.

  • judith.taylor.56 - 2012-12-16 16:25

    More pollution, more deaths in local communities - wonderful! And more communities made indigent. Eskom is so useful

  • fanie.basson.7 - 2012-12-16 21:45

    Wie gaan die myne se grond rehabliteer.Volgens inligting kan die myngrond nooit weer vir landbou aangewend word nie,weens suur water

  • vernon12345 - 2012-12-16 23:45

    Racism at it best.

  • guy.barnes.900 - 2012-12-17 05:38

    Why doesn't the Public Protector have a look at this, bearing section 9 of the constitution in mind...?

  • step.fou - 2012-12-17 19:50

    in terms of the new PPPFA regulations ESCOM as a shedule 2 as per the PFMA is not allowed to do this, wonder if those Mining houses will have the balls to sue ESCOM for this un constitutional section 217 practice.

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