The deal between Australian company South32 and Seriti Resources could result in Eskom paying R1 billion more for coal annually, says the ANCYL.
About 700 community members from mining towns in Mpumalanga will march to the head offices of Australian mining house South32 in Melrose Arch on Friday to deliver a memorandum to oppose the sale of its mining operations in the province.
The sale includes four collieries and three processing plants. The much-talked-about deal between South32’s South African Energy Coal and Seriti Resources has raised questions about whether the merger will make competitive procurement possible.
According to Mpumalanga provincial treasurer of the ANC Youth League (ANCYL), Sam Masango, South32 had been benefiting from a subsidised Eskom tariff of 50 cents per kilowatt hour (kWh) – the market-related rate is 90-95 cents per kWh – for its Hillside Aluminium Refinery in Richards Bay for years.
He said the company was losing R 1 billion per annum because of the low price of the coal in the Duvha contract to supply coal from Ifalethu Colliery to Duvha Power Station.
“Because of the gain South32 has in the power purchase for its Hillside Aluminium refinery, they have been quiet about the financial loss in the Duvha contract,” said Masango.
“If South32 closes the deal to sell its coal assets with Seriti, the R1 billion loss per annum would be passed to Seriti.” In this case, Seriti would have to renegotiate with Eskom to increase the price of coal supplied from Ifalethu to Duvha.
“This would result in Eskom paying R1 billion per annum more for the coal it buys from Ifalethu Colliery to burn at Duvha Power Station. The Duvha contract is for 14 years so the total amount Eskom would overpay is R14 billion,” said Masango.
He said South32 needed to find a way to incubate the community into the deal and take care of its rehabilitation liabilities and social labour plans before it sold off its assets.
“How is the community of Mpumalanga going to benefit from this deal because, as far as we know, no mining company has ever built a township with infrastructure where they mine?” he said.
“Therefore, we strongly feel the community of Mpumalanga should benefit, even if it’s through a 50-50 split with Seriti.”
Masango said the aim behind the march was to motivate for the deal to be more inclusive of the community to create an environment where small business could flourish, instead of having a monopoly that supplied 45% of the coal purchased by Eskom.
“If they go ahead with the deal, they would be building another Gupta entity which would be in direct contradiction of the inclusive and socialist state we are working towards, where poor communities living near mines can also benefit from the mining,” said Masango.
It was estimated that South32’s coal assets have rehabilitation liability of over R12 billion and the company was losing approximately R300 million per month at current coal prices for coal exported via the Richards Bay coal terminal.
Chairperson of South African Youth in Mining, Thato Abrahams, said as a representative of youth-owned companies in the mining sector, they supported the march in order to promote justifiable social and economic development.
“We sympathise with the community. Their concerns are really the issues affecting all South Africans. We argue that the country needs a different empowerment model and this South32 transaction ought to be exactly that, a chance to meaningfully create new players in the country,” said Abrahams.
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