The South African state plans to build a large coal mining supplier to Eskom via repositioning of the troubled diamond miner Alexkor in what could be seen as a follow up of 2012 African National Congress (ANC) resolutions.
Following long discussions sparked by a call for nationalisation of mines from within the ANC, the ruling party resolved in its 2012 Mangaung conference to pursue a mixed approach. The nationalisation call was killed and the ANC adopted a conciliatory document which was informed by its research paper State Intervention in the Mineral Sector (SIMS). The SIMS made a call that the state can jack up its role in the mining sector without nationalisation and through beefing the activity of state owned enterprises (SOEs).
The deputy minister of public enterprises Bulelani Magwanishe unveiled on Friday a bold plan to lead Alexkor into the coal sector.
Magwanishe seemed to suggest that prospects in the diamond sector were not looking good and as such Alexkor will be diversifying into coal mining. Quoting from the Bain & Company Global Diamond Report 2013 the deputy minister said “Even though the retail market for diamond products is showing signs of recovery, production is yet to return to pre-crisis levels. Total rough-diamond output increased by 4% in 2012 to 128 million carats, which is still below the pre-crisis peak of 176 million carats in 2006”.
He said the South African diamond industry was in a structural decline. “Annual diamond production has decreased since 2005, when it peaked at just over 15 million carats. There is an indication that the 2012 production figures will be about 7 million carats”.
Magwanishe added that the South African diamond manufacturing sector, which forms a key part of the government’s beneficiation plan, has shrunk in size. “In just three years, it has gone from 3 000 polishers to about 300”.
He said while Alexkor was looking to fashion sustainable business model within the diamond sector the state owned enterprise needed to diversify its operations. “In its current form, Alexkor is not sustainable in the medium to long term”.
Last year, at a Special General Meeting, The Minister (of Public Enterprises Malusi Gigaba) requested the Board to look at the Alexkor Act, to create a new future for the company”.
We requested deep and seasoned market analysis that will enable us to understand the competitive position of the company. The Board has responded with a game changing strategy that has a well-crafted compelling value proposition that puts/positions Alexkor as a world-class mining company with aspirations to respond to the immediate needs of the country”.
Our own analysis shows that Eskom will start experiencing coal supply shortages by 2018. The State has to move fast to avert an energy crisis. Electing to enter coal mining, will fundamentally change the value proposition of Alexkor to the people of South Africa.”
He said Alexkor is expected to be a vanguard for transformation in the coal mining sector, as the Government’s call for transformation in the sector has effectively gone unheeded.
“Black emerging miners are still battling to gain a footing in the sector. Alexkor will partner emerging black, women, youth-owned miners through offering the necessary technical and business expertise to enable graduation of these miners from emerging to established, realising the objectives of the Eskom Emerging Miners Strategy”.
Magwanishe added that “We must expect opposition, challenges and pushback by those who will see the strategy as a threat to their long entrenched positions. We must not be fazed by such; our agenda is bigger than those forces”.