JOHANNESBURG (miningweekly.com) – Chamber of Mines CEO Roger Baxter has urged government to ensure there is policy certainty in the coal sector, which makes up the highest component of mineral sales in South Africa.

“Coal mining needs a predictable, stable and competitive policy and regulatory environment,” he told delegates at the IHS Energy South African Coal Exports Conference, in Cape Town, this week.

Baxter cited several obstacles mining companies were facing, including tax regime uncertainty, disagreements on the Mining Charter, uncertainty about the interpretation and administration of mining regulations and uncertainty over land claims.

“This has had an impact in terms of the investment outlook, which we need to hit head-on.”

Baxter called for areas of policy uncertainty concerning strategic minerals and export restrictions to be resolved.

Delegates to the conference in Cape Town met this year amid troubled times for coal exports. Baxter said coal export prices had fallen by 60% since 2012, while South Africa’s share of the global coal market had dropped from 14% in 2004 to 8% in 2014.

He stressed that policy certainty was essential, given that the coal sector was capital intensive and high risk.

“It is exposed to cyclical commodity markets. It is generally a price maker and cannot pass on cost increases to the final consumer.”

Baxter said that, to encourage investment in mining, including coal mining, policies should contribute to reducing the risk of investment in long-term projects. This should be a joint effort between government and companies.

“We need to be in the same canoe, paddling in the same direction, and if there’s a hole in the canoe . . . fix it together.”

He said South Africa was ranked a low sixty-fourth out of 122 countries in the Investment Attractiveness Index in the Fraser Institute Annual Survey of Mining Companies for 2014.

“We should be in the top 20, not down at 64,” said Baxter.

Issues such as taxation of the mining sector, changes to the royalty base, environmental taxes and carbon taxes, as well as labour instability and union rivalry, hampered potential investment.

Department of Mineral Resources deputy director-general of mineral policy and investment promotion Mosa Mabuza told delegates at the conference that changes would have to be made to sustain growth and development in South Africa’s coal industry.

He said the government intended to ramp up the growth of the coal industry.

“Coal is good for growth. Coal is good for investment. It’s good for jobs and good for development,” he noted, while encouraging coal miners not to allow the current challenges in the industry to cloud the long-term prospects in the sector.

Coal contributes more than 90% to electricity generation and 30% to liquid fuel requirements in South Africa. 

Mabuza further urged companies to improve their performance on transformation, which he said had lagged in recent years. 

“The coal industry was one of the first and fastest movers in implementing our transformation policy after its introduction, but today transformation goals remain the same, or have been eroded over time. This situation is untenable over time and must be addressed.”