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Indian investors not ‘scared’ of South Africa coal challenges

Indian industrial and mining companies are taking an increasing interest in coal-mining developments in South Africa and are "not scared of the challenges", according to Manus Booysen, partner and head of mining, energy and natural resources at legal firm Webber Wentzel.

But he said the uncertainty being created by the proposed amendments to South Africa’s mining legislation in terms of the Minerals and Petroleum Resources Development Amendment Bill — in particular how these could affect coal — was not conducive to attracting investment. He was also critical of the "uncooperative" role being played by Transnet in providing the infrastructure needed to match export coal railage capacity to the existing port handling capacity at the Richards Bay Coal Terminal.

He believed Transnet’s attempts to promote black economic empowerment (BEE) were not being carried out "in a proper manner" and the approach taken by the state-owned utility, "to some extent, as far as BEE is concerned, is being driven by political ideology".

He said: "We all understand the need for — and the importance of — BEE and we are all a part of this process but it must be done in a proper manner.

"It is not correct for Transnet to reserve the right to allocate a certain percentage of rail capacity to BEE companies irrespective of whether those companies have export allocations at the ports.

"It does not appear to me that Transnet is aiming at the same objectives as the coal producers and the Richards Bay Coal Terminal when it comes to fully utilising the country’s export potential," Mr Booysen said.

He was speaking in Johannesburg after attending the McCloskey Indian Coal Markets conference in New Delhi at the end of last month.

He said India needed to import increasing volumes of coal for its power stations and South Africa was the obvious supplier after Indonesia and Australia. "Indonesia is the closest supplier but they have a problem with coal quality. Australia has a problem with their high cost of production.

"SA is well placed to benefit from this business if we could get the coal out of the country — which we cannot because of the rail bottleneck."

Indian companies such as Jindal Steel & Power and the Atha Group had already bought into South Africa, he said, and others such as Dalmia Cement were looking at getting involved.

Regarding the Minerals and Petroleum Resources Development Amendment Bill, Mr Booysen said the key issue for investors was the uncertainty that would result if coal were declared a strategic mineral and the minister of mineral resources were given the power to decide how much of a coal company’s production would have to be sold domestically, at what prices, and how much could be exported.

"If you know what the risks are, you can decide whether to accept them and how to deal with them. You cannot take such decisions if there is uncertainty about those numbers. "

Source: www.bdlive.co.za