State-owned coal firm Coal India’s ambitious plans to source coal from South Africa will not be easy to realise, an analyst said on Tuesday, after reports that the company would unveil big investments in the country in the next two years.
Coal India was keen on acquiring thermal coal, but the priority was coking coal, which the Asian country was running out of.
However, global energy consultancy firm Wood Mackenzie analyst Xavier Prevost said that a major obstacle to Indian companies investing in South Africa was black-economic empowerment.
He said that many of the country’s coal prospecting rights were black-owned, and that the Department of Minerals and Energy (DME) did not want to dilute this ownership through mergers with international companies.
The problem was that Indian investors wanted to control their investments in other countries, which meant a shareholding of 51% or more.
“If the empowerment level decreases, the DME will react,” stated Prevost, who was formerly chief economist for the department.
He also said that in many cases the empowerment companies also wanted to maintain majority ownership of their projects.
According to legislation introduced in 2004, companies mining in South Africa needed to be 16% black-owned by 2009, and 26% black-owned by 2014.
Meanwhile, there seemed to be an indication that India and South Africa were beginning to see eye-to-eye.
“There is government-to-government discussion between India and South Africa and they are going to relax some rules for us, but these things take a long time,” Coal India marketing director K. Ranganath was quoted as saying by Reuters.
Prevost said that it was unlikely that government would change ownership legislation, but rather streamline the processes involved in acquiring mineral rights in South Africa.
Meanwhile, newswire Bloomberg News reported that India could have a 51,1-million ton coal shortfall by 2012, citing Ranganath.
Coal India was keen on acquiring thermal coal, but the priority was coking coal, which the Asian country was running out of.
However, global energy consultancy firm Wood Mackenzie analyst Xavier Prevost said that a major obstacle to Indian companies investing in South Africa was black-economic empowerment.
He said that many of the country’s coal prospecting rights were black-owned, and that the Department of Minerals and Energy (DME) did not want to dilute this ownership through mergers with international companies.
The problem was that Indian investors wanted to control their investments in other countries, which meant a shareholding of 51% or more.
“If the empowerment level decreases, the DME will react,” stated Prevost, who was formerly chief economist for the department.
He also said that in many cases the empowerment companies also wanted to maintain majority ownership of their projects.
According to legislation introduced in 2004, companies mining in South Africa needed to be 16% black-owned by 2009, and 26% black-owned by 2014.
Meanwhile, there seemed to be an indication that India and South Africa were beginning to see eye-to-eye.
“There is government-to-government discussion between India and South Africa and they are going to relax some rules for us, but these things take a long time,” Coal India marketing director K. Ranganath was quoted as saying by Reuters.
Prevost said that it was unlikely that government would change ownership legislation, but rather streamline the processes involved in acquiring mineral rights in South Africa.
Meanwhile, newswire Bloomberg News reported that India could have a 51,1-million ton coal shortfall by 2012, citing Ranganath.
- with reporting by Reuters
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Edited by: Mariaan Webb
Creamer Media Deputy Editor Online
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