Gerard McCloskey and the management team of the McCloskey Group
Leaders of the Coal Mining Industry
Ladies and Gentlemen
As you will know, February 2 is an important day in the history of this Republic. It was on this day exactly, 22 years ago, that we as a nation experienced the breakthrough that led to our working together to build an inclusive and prosperous society.
I am therefore pleased to join the leadership of our country’s coal mining industry, for the second year in a row, to share this special day with you. We are able to reflect on how our sector can, in a spirit of collaboration, contribute to the great cause set in motion by those historic events of February 2, 1990.
They set in motion the release of Nelson Mandela from prison, the unbanning of liberation movements, and opening the way for freedom and democracy under a splendid Constitution.
Against this background, I have no doubt that this industry will also be keenly following the deliberations that will take place in the ruling African National Congress during the course of this year which, I presume, will have an important bearing on our coal industry.
Resource, Reserve and Employment
The vital and strategic role played by coal in South Africa’s economy is well documented. The role played by this industry is supported by the vast resources illustrated in the country’s world rankings. The country is ranked number 8 in terms of reserves and is the world’s 7th largest coal producer.
South Africa’s production decreased marginally by 0.4 percent to 316 Mt in 2010 compared with 2009, owing to heavy rainfall and flooding in January 2010. During the same period, local sales value increased by 6 percent to R37 billion driven by higher unit values, while export sales value rose by 18.8 percent to R37.7 billion.
In 2010 we saw the growing significance of Asia, particularly China and India, as a destination for our coal exports, accounting for a total of 59 percent of all our exports, followed by Europe with 25 percent, the Middle East with 6 percent and Africa with 6 percent. These developments can be described as a “game-changer”.
Coal contributes 90 percent to electricity and 30 percent to our liquid fuel requirements. The industry remained the third largest employer, accounting for 15 percent of total mining industry employment. This highlights the economic contribution, and therefore summarises the economic context within which the industry operates.
It is imperative that the industry, working together with government, should continuously explore ways of improving its performance and ensuring that it continues to grow and raise its contribution to our country’s economy.
This would ensure that the country makes headway in terms of resolving its triple developmental challenges of poverty, unemployment and inequality.
On the issue of reserves, I indicated to you last year that the Council for Geosciences (CGS) had been tasked to conduct a study into the country’s coal resources and reserves. I am pleased to announce today that the study has been completed and a report is being finalised.
The results of this study are likely to be released in the first half of this year. We are hopeful that this will present an opportunity for stakeholders to discuss the future of the industry. In addition, the study will help inform government’s long range planning in terms of security of local supplies. Also, the study could provide opportunities for the growth and expansion of the industry.
Challenges
While there have been positive developments in the industry, there are challenges that stakeholders need to address. As the Department, we undertake our work through extensive consultation with our stakeholders through the Mining Growth, Development and Employment Task Team (MIGDETT).
Through the MIGDETT processes, stakeholders identified several challenges facing the industry, including: job creation, skills shortage, infrastructural constraints and access to rail and port facilities for junior miners. This forum is where most of these issues are being discussed in detail.
MIGDETT has resolved to form a Coal Sector Subcommittee, which will deal directly with issues pertaining to the sector and devise a strategy for its survival and prosperity. In so doing, stakeholders hope to speed up the resolution of problems facing the sector while accelerating the implementation of the agenda to address the national developmental challenges of the 21st century.
Government will continue to ensure that the industry thrives. In this regard, government is playing its part in addressing the infrastructural constraints in a co-ordinated fashion and at the highest possible level, which is the Presidential Integrated Infrastructure Planning Committee. This is an opportunity for the industry to participate and contribute to the country’s long term developmental plans.
Coal and the Environment
Although the coal mining industry benefits the country in many ways, it can impact negatively on the environment, which includes Acid Mine Drainage (AMD). Also, the burning of fossil fuels, including coal, results in the release of greenhouse gases that contribute to climate change.
Advances in science are providing a more accurate feedback on the environmental impact of fossil fuels. This information is now starting to guide international and local industries on how to mitigate the negative impacts resulting from exploitation of this energy source. In order to ameliorate the impact of acid mine drainage in the coal mining sector, the Council for Geosciences is conducting focused research to quantify the extent of the problem and identify possible rehabilitation measures.
While South Africa has made clear its commitment to reduce its carbon footprint through various programmes including the diversification of its energy mix, coal still has a vital role to play in the country’s energy generation. This was indicated in the UNFCCC COP 17/CPM 7 where South Africa made it clear that rebalancing of its energy mix did not mean total abandonment of coal.
At this conference, ground-breaking resolutions were adopted in response to the climate change debate. The global debate on the role of coal requires this collective of coal experts to work collaboratively with government in order to make our enduring contribution to the preservation of the planet in which we must all live.
The coal industry will continue to play an important role in the economy of the country for the foreseeable future but it must reposition itself so as to be current and relevant.
In this regard, the industry needs to raise the level of investment in clean coal technologies (CCT) research programmes. This is likely to present the country with opportunities to continue exploiting this vast resource without the risk of raising further the carbon intensity of its economy.
Transformation in the Industry
There is a dire need for sustainable growth and development of the industry to ensure the speedy realisation of Government’s transformation objectives. This is in order to accommodate the groups yearning for inclusion within the mainstream economy, which still reflects the pre-1994 demographic dominance of certain groups. South Africa has about 49 million citizens, more than 50 percent of them women. Despite the good intentions of the transformation laws, women are still not properly represented in the sector.
Continued reliance of the sector on the previously advantaged 20 percent of the population, obsessed with a bottom line approach at the expense of national objectives, has undermined the objectives of this sector.
We need to use the wilfully excluded vast human capital to devise a truly South African solution to the challenges facing this sector. More disappointing is the habit of most Black Economic Empowerment (BEE) companies merely to buy these assets and yet still perpetuate the pre-1994 trend, in terms of their asset management and control.
With that in mind, the sector must take stock of what it is doing to resolve the well- documented problems experienced by small producers and aspirant exporters in terms of access to the export markets through the privately owned and operated Richards Bay Coal Terminal (RBCT). There are certain elements who seem determined to keep competition out by either denying junior miners allocations or charging them exorbitant prices for access to this facility.
I hope the sector will do something more tangible and inclusive to alleviate the plight of the junior operators. Additionally, these junior operators tend to find it difficult to access funding for their exploration and mining activities. This leads to some of these players selling their properties prematurely, which defeats the objective of raising levels of participation of BEEs in the sector.
Safety
The performance of the coal industry with regard to safety has resembled that of the curate’s egg. It has been “good in parts”; that is, better in many respects than other sectors in the mining industry. However, this year, already, this sector has had three fatalities even before the end of the first month in this calendar year.
There was commendable response by some mining companies to this. Over and above the section 54s that were issued, production was stopped to ramp up and heighten safety awareness. Yet it is our considered view that there are signs that the dark clouds of complacency are creeping in at a time when we can least afford them to do so. Complacency, if left unchecked, has the potential to reverse the gains on safety that has been recorded by the coal industry in the recent past.
So the marching orders I wish to give to this industry is that, among other things, mining in previously mined areas must be done in a manner that takes advantage of available modern technology coupled with a constant programme of retraining the entire frontline leadership team.
In doing so we will be living up to the spirit contained in the commendable SLAM (stop, learn, assess and mitigate) exercise that has become an important standard in the mining industry.
Finally, despite the enormity of the challenges, we need to persevere, and raise our contribution to the economy as well as to the wellbeing of the nation. Our job is not complete yet. You have a modest and yet profound contribution to make in the realisation of the dreams of February 2, 1990. We have the means and expertise that reside right here in this conference to make sure that the coal sector does not become the poor cousin of the broader mining industry.
I would like, once more, to thank the organisers of this conference for inviting me, and I wish you well in your deliberations, in the spirit of this historic day.
I thank you!
