An analysis of the consequences of declaring coal a strategic resource in South Africa

M.Ing. (Engineering Management)In January 2008, South Africa experienced a power crisis which changed how South Africa viewed its primary energy sector. South Africa largely depends on coal to generate 77% of the country’s energy needs. Eskom is the main electricity producer and the largest in Africa. Coal is the third largest exporter earner after gold and platinum and the second largest contributor to the South African export market after platinum (Falcon and Prevost, 2012). This highlights the importance of coal to the South African energy sector and economy. According to Geologist Chris Hartnady, the estimated coal production peak is in 2020, a period where most Eskom power station and mines would reach their lifespan (Davie, 2010). There are increased concerns about the quality of coal supplied to Eskom and the preference of coal producers to export coal to international markets. This could possibly compromise the supply of domestic coal. Historically, Eskom was supplied with lower grade coal and higher grade coal was exported. The increased demand for lower quality coal in the Asian markets has been an aggravating factor for the South African government to secure the security of coal supply to Eskom (Sapa, 2012). In March 2013, the South African government declared coal a strategic resource. This implies that the State has the right to regulate and restrict the export of coal to international markets. The available research conducted, by consulting economic firms such as the mineral advisory firm XMP consultants; suggest that the declaration of coal as a strategic resource will impact negatively on the South African economy in some ways and also influence investment attraction into the country (Booyens, 2013). This research seeks to analyse the consequences of declaring coal a strategic resource in South Africa. The enormities in the research subject title, “An analysis of the consequences of declaring coal a strategic resource in South Africa”, makes it extremely difficult to cover all aspects involved in a minor dissertation and to substantially quantify the results in monetary terms due to the facet of dynamic factors involved..