Despite coal being a significant contributor to South Africa’s GDP and electricity generation, funding for new coal mines from commercial banks is limited in the international and local market.
Rand Merchant Bank mining and resources advisory head Willie Hattingh says the general approach taken by banks is to support existing clients while retaining targets to reduce their exposure to carbon-intensive industries, including coal mining, over time.
During a panel discussion at this year’s Coal and Energy Transition Day, held on July 22, he explained that general private equity has been absent from the mining sector as a whole for a long time.
He said specialist mining private equity has been absent from South Africa largely, but also from the coal sector specifically.
Hattingh explained that traders have played a big role in structured funding into building new plants and new projects, but on a smaller scale than what large balance sheets in the past were able to develop.
Hence, he said the issue of access to capital is a reason why many large-scale and big mining complexes are not being developed.
“I think that source of capital is not necessarily there.”
Recognising the importance of coal in the local economy, South African Presidential Climate Commission (PCC) executive director Dorah Modise discussed how coal can fit in with the country’s decarbonisation goals through alternatives such as clean coal technologies.
“Decarbonisation is about gradually moving towards a space where we emit less and hopefully reach net zero by 2050. So, any initiative that’s leading us along that path is quite credible and can receive support,” she explained.
She thus argued that new technologies and approaches are needed to ensure energy security and industrial competitiveness while moving towards decarbonisation.
“If they are moving towards that direction, then they remain investable in a decarbonisation space. The main issue is for us to clearly articulate that and submit clear proposals,” she added.
Industrial Development Corporation (IDC) energy/power strategic business unit (SBU) business development manager Ali Mnisi explained that the IDC continues to support coal operations in South Africa that support energy generation, as well as existing coal-fired power stations, with a focus on energy security pursuant to industrialisation.
“Coal is not necessarily an issue . . . it’s more [about] dealing with emissions and reducing those,” he said, noting that the IDC would not prioritise new coal-fired power stations in South Africa and would continue to rather consider investment in cleaner coal technologies.