Mineral resources and energy minister Gwede Mantashe says coal is under siege despite being an affordable source of energy and this week challenged the industry and affected communities to defend its use.
The fossil fuel accounts for more than 80% of SA's energy generation, but it is also the single biggest contributor to climate change. Globally, coal is becoming less economically viable due to costs associated with its environmental impact. The government has committed to reducing greenhouse gas emissions.
But Mantashe, a former coal miner and unionist, told mining executives in Pretoria this week that the use of coal is under attack and should be defended.
“The reason we are here is to discuss how we can survive that offensive and extend the life of coal mining. We are in a situation where coal is under siege,” he said.
Communities and unions whose livelihoods will be affected by the transition also needed to speak out. “What I am putting to you as labour and communities is that I do not hear you. Half the time you whisper,” Mantashe said.
• Coal was the highest revenue earner, contributing 21.4%(R130.57bn) of total mining revenues (R608.99bn) in 2020
- Department of mineral resources and energy
— In Numbers
He believes SA should not be quick to abandon coal, citing the 89,548 employees that rely on the sector, and its contribution to the fiscus.
According to the department of mineral resources and energy, coal is the highest revenue earner, contributing 21.4% (R130.57bn) of total mining revenues (R608.99bn) in 2020.
In November 2021 rich nations at the COP26 climate change conference pledged $8.5bn (R130bn) towards SA's just transition to a low-carbon future over the next three to five years.
“When you generate R130bn in one year, my mind gallops to say we are being offered R131bn to close coal mining, and I am saying you are making that money in one year. How do you close your projects for what you do in one year? I am not a rebel, I am raising the reality that must be in the analysis we are making,” Mantashe said.
Vuslat Bayoglu, MD at private investment company Menar, said there is pressure from groups seeking to eliminate the use of coal immediately, outside the government-approved and industry-supported Integrated Resource Plan.
“Financial institutions are also increasingly adopting a hostile attitude to development of coal mines. And so are nongovernmental organisations that are causing significant obstruction in environmental authorisation processes and water-use licence applications.”
Bayoglu said because many mining companies are focused on what they know best — mining — they haven’t been vocal in the debate about beneficiation technologies.
“As a result, the just transition debate has not adequately included the importance of clean coal technologies such as carbon capture, utilisation and storage.”
The just transition debate has not adequately included the importance of clean coal technologies such as carbon capture, utilisation and storage.
— Vuslat Bayoglu, managing director at Menar,
For Bayoglu, developing economies like SA's should be allowed to develop their own economic strategies that will allow them to manage carbon emissions without destroying the little potential there is for them to catch up.
“Without reliable and cheap power — a combination which at this stage can only be provided by coal — we must forget about employment and poverty reduction, and we must accept socioeconomic instability as the permanent feature of our society.”
Mantashe’s comments come as research released by the International Institute for Sustainable Development (ISSD) think-tank recommends a review of SA's energy fiscal policy to align it with the action needed to achieve the energy transition.
The ISSD report, titled “South Africa’s Energy Fiscal Policy.” , released this week, points to the tripling of energy subsidies from R58bn in the 2017/2018 financial year to R172bn in 2020/2021. According to the report, the increase is mainly due to the need to bail out Eskom by R56bn in 2020-2021 against the state-owned entity’s total accumulated debt of R488bn.
“This effectively supported the ongoing combustion of coal in South Africa, which made up 88% of the electricity mix in 2018, with Eskom producing more than 90% of total power supply.”
The report says reforming or reducing bailouts provided to Eskom is key to reforming the country's fiscal energy regime. It says comparing fossil fuel subsidies, tax and non-tax revenues reveals that social costs are five times higher than revenues, with an annual net cost to society of R550bn.
National Treasury senior economist Memory Machingambi says the government is committed to reducing greenhouse gas emissions, to carbon pricing and the reduction and phasing out of fossil fuel subsidies.
“We sit in a very peculiar place where we are a top-10 global emitter of greenhouse gas,” says Machingambi. By introducing a carbon tax the government was signalling that the economy needed to transition.
“It took us 10 years to get the carbon tax in place but by introducing the carbon price, which we are introducing at low rates, we are hoping gradually that we are influencing future investment decisions.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.