An investment of between R90 billion and R110 billion is required to build 40 new coal mines to meet the projected growth in domestic and export demand for coal over the next decade in South Africa. Frost & Sullivan believes this investment will be crucial to ensure that the country’s energy needs are met.
“South Africa’s energy intensive economy is overwhelmingly dependent on coal,” explains Frost & Sullivan metals and mining analyst Wonder Nyanjowa. “This fossil fuel provides about 75% of the country’s primary energy needs, supports 90% of the electricity generated and provides feedstock for the country’s synthetic fuels manufacturing plants.”
Coal is also used directly as a fuel in the steel, cement and brick manufacturing industries. The limited availability of alternative energy sources and the apparent indecision regarding nuclear energy point towards coal’s continued domination of the country’s energy mix.
“However, the production and consumption of coal in South Africa have remained fairly unbalanced, with rising coal demand in one hand and constrained supply sources on the other,” Nyanjowa says. “This necessitates additional investment.”
Eskom is expanding its power generation capacity by building new power stations and returning into service three power plants that will increase its coal consumption needs by an additional 50 million tones per annum. The expansion of Sasol’s synthetic fuels manufacturing capacity would also see its coal consumption rising by an additional 25 million tones per annum.
“In other words, the domestic demand for coal is set to increase by 75 million tones per year over the next decade,” Nyanjowa notes. “Export demand for coal from China, India and the European Union is also forecasted to remain strong.”
The existing coal production capacity of the country can not sustain this growth. Since 2003, South Africa’s coal production has remained stagnant at levels around 240 million tones a year, only posting small incremental changes at best.
Depleted coal mines in the Witbank, Ermelo and Highveld coalfields in the Mpumalanga province, together with the operational and technological constraints that coal miners have been facing, account for the stagnation of coal production. Industry sources indicate that most of the existing coal mines in the Mpumalanga province will be exhausted by 2020, whilst two collieries in KwaZulu-Natal have already closed.
“Frost & Sullivan forecasts coal supply to remain flat in the short to medium term, owing to long lead periods between exploration and commissioning of new mines,” Nyanjowa says. “The Waterberg coalfield in the Limpopo Province hosts about 50% of the country’s coal reserves and it has one colliery operated by Exxaro Resources. Other coal miners such as Anglo Coal and BHP Billiton Energy are still prospecting in the area.”
The Waterberg coalfield already has 2 coal fired power stations attached to it and it represents the future of coal mining and electricity generation in the country. However, further developments will be needed to ensure that the drive to meet the country’s energy requirements are not constrained by an insufficient coal supply.