World Economy

S. Africa Needs to Invest $9b in Coal Resources

S. Africa Needs to Invest $9b in Coal ResourcesS. Africa Needs to Invest $9b in Coal Resources

South Africa will need to invest 100 billion rand ($9 billion) to develop its coal resources in the “short-to-medium term”, the mines minister said on Wednesday, as softer prices for the commodity weigh.

Speaking at a coal exports conference in Cape Town, Ngoako Ramatlhodi said the volatility of prices had cost Africa’s most advanced economy billions of rand in revenue, Reuters reported.

Meanwhile, South Africa lost 23 billion rand ($2 billion) in coal export revenues last year due to a drop in prices for the commodity, the minister said.

South Africa needs investment of 100 billion rand to develop its coal resources in the “short-to-medium” term to expand production and improve infrastructure, Ramatlhodi said at the IHS coal conference in Cape Town.

“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 said.

Last month, Glencore’s South African coal unit, Optimum Coal Mines, warned it may close some of its mines and reduce annual production by at least 5 million tons and leading to job losses.

Coal is South Africa’s chief source of energy, accounting for 95 percent of electricity generation, 70 percent of primary energy and 30 percent of petroleum liquid fuels.

State power utility Eskom, the main buyer of domestic coal, has been implementing rolling blackouts this year as it struggles to meet electricity demand after decades of underinvestment in new generating capacity.

  India Opens Up

India’s plans to attract badly needed foreign investment and technology to its coal sector are getting a cool response from some miners and trading houses, even though the country is one of the few bright spots for global coal demand, Moneycontrol reported Wednesday.

Seeking to curb a growing reliance on imports, Prime Minister Narendra Modi passed an order in December to allow private firms to mine and sell coal for the first time in more than 42 years.  But even with India on track to overtake the United States as the second-largest coal consumer after China this decade, executives at Japanese trading houses and some of the biggest global miners said they were currently not looking to invest.

Red tape, problems with land and environmental approvals, and the quality of its coal have been cited as issues deterring investment, while on top of this Asian coal prices are languishing near six-year lows.

Despite huge coal reserves, India’s failure to modernize mining means it has become the world’s third-biggest importer, shipping in coal from countries such as Australia and Indonesia.