Public Enterprises Minister Pravin Gordhan has suggested that Parliament call in some of the big and small coal suppliers to account for their export of coal, amid increasing concerns about the shortage of coal in the country.
Gordhan was speaking after several Members of Parliament suggested that the priority is to use coal in South Africa rather than export coal. “Is that a proposition to look at or when it suits you, you make money outside of the country and then you dump your customary customer that has kept you going as an industry for over 30, 40, 50 years?
“You might want to call some of the big and small coal suppliers and get into the mindsets they operate with and some of the challenges that Eskom would be facing in that particular regard,” Gordhan told a joint hearing of Parliament’s Portfolio Committees on Public Enterprises and Energy.
He also suggested that Eskom should consider moving into becoming a supplier of renewable energy.
“If coal begins to decline slowly for climate change and other reasons, there’s no reason why Eskom should not be a supplier of renewable energy as well . . . and provide competition. It has nuclear and coal in its portfolio. It uses diesel from time to time. It’s an interesting proposition for the committee and the public to start entertaining in some way.”
Eskom CEO Phakamani Hadebe said Eskom was trying to rebuild its relationships with coal companies, which had turned sour over the Gupta years.
“In previous years, that relationship has been spoilt. The first time we began to experience challenges on coal was when we decided not to invest in cost-plus mines. When we didn’t do so, companies looked at other options, and decided to export.”
He said export prices had increased to about $110/t, making it very attractive for coal suppliers to export.
“We have been engaging with them and highlighting the long-term relationship we want to build. One of the coal companies agreed to sell us ten-millions tons of coal at a very acceptable price two or three months ago, because of that engagement.”
He said the decision not to invest in capital expenditure on cost-plus mines had cost Eskom. The utility had decided not to put money into ageing infrastructure as they thought Medupi and Kusile would be ready earlier. Delays have now set them back.
Coal stockpiles were at risk of being depleted as more coal was being exported.
Eskom group executive of generation and sustainability Thava Govender explained that there were very low coal stockpile levels at nine power stations and that managing coal during the upcoming rainy season was going to be a huge challenge. He said wet coal was a massive burden.
“Our biggest challenge is when you have such low stockpiles. It’s a problem when it rains.” He said large stockpiles of 30 or 40 days were fine. Rain wets the top layer, but the coal is dry at the bottom.
“But with a stockpile below ten days, the whole stockpile gets wet. Then there are problems on how to burn it and transport it.”
Eskom was looking into technology to see how to cover the stockpiles, which often took up the space of four times a rugby field.
He said delivery of coal was also poor.
“We are securing coal resources, but the biggest challenge is the ones we are contracting, the delivery is poor. And we are also paying much more for the coal. Suppliers know we have a shortage of coal, and that is why the price is rising.”
Eskom chairperson Jabu Mabuza told the committees: “We are now transporting coal . . . and people in coal mining are telling us, ‘half of that load is ash anyway’. The sad reality is someone has to pay. Whether it is the user or the taxpayer, somebody is gonna pay.”
Govender said some contracts were also delayed, sometimes for months, due to compliance issues. Eskom was determined to be ethical.
“If companies do not have a tax or value-added tax certificate we will not contract them.”
Govender said a shortage of skills also posed a problem. He said Eskom was considering looking at sending more technical staff directly to coal-fired power stations, where they could offer more value, instead of keeping them at head office.
“We are looking for additional funding for essential maintenance, focusing on units that cause problems.” Half of Eskom’s coal power stations are more than 36 years old.
He said Eskom also needed to contract more skilled staff.
“We have lost a lot of people. We have to bring them back on contract basis in the short and medium term to stabilize the situation.
He said Eskom had experienced "a massive loss of experience" as many people, some with 40 years of technical and managerial experience, had left Eskom to work at coal-fired stations which were being built in countries like the Philippines and Cambodia.