XAVIER PRÉVOST Investors have adopted an attitude of “wait and see”
Coal industry heavyweight and consulting firm XMP Consulting senior coal analyst Xavier Prévost will endeavour to provide the industry with insight into how best to implement “rescue” plans to help stave off the “coal cliff”, at this year’s 2018 Joburg Indaba.
Prévost will be addressing power utility Eskom’s current coal shortage predicament at the Indaba that will take place on October 3 and 4 at the Inanda Club, in Johannesburg.
Eskom’s well-publicised coal shortage woes are a pressing concern for the local coal industry and the economy, emphasises Prévost. Consequently, the South African coal industry urgently needs more capital investment and new mining projects and mines, particularly from junior miners, to replace its ageing legacy mines that are beginning to near the end of their lives.
“If this is not done straightaway, the famous ‘coal cliff’ – a slump in coal production that will see the coal industry being unable to meet the energy sector’s coal requirements – will occur, resulting in less electricity being produced and the collapse of the coal industry and the economy of the country,” he warns.
Prévost – who will be attending the Joburg Indaba for the first time this year – has taken a strong stance on policy instability, corruption and politicking at government level. He cautions decision-makers against allowing political decisions and principles to govern the mining industry.
The coal industry will only be salvaged from its current state of investment withdrawal and dilapidation if the governance of the industry and decision-making are made according to economic principles as opposed to political ones, Prévost emphasises.
He
anticipates that efforts to rebuild the sector once again could take up to a decade or longer to begin to show notable results, if steps to rectify the damage done to the coal industry are undertaken immediately. He explains that this is owing to the “severe blow” that the industry has suffered in recent years because of economic and political upheaval that has left investors hesitant to invest in coal.
Prévost says there was investor optimism amid President Cyril Ramaphosa’s taking office at the beginning of this year, as investors and mining houses were eager to welcome economic and legislative stability and renewed investment in the country’s mining sector. However, this optimism was short-lived, as little has changed and the industry continues to face steadily declining gross domestic production, persistent policy uncertainty and fluctuation, as well as a hostile operating environment.
As a result, Prévost highlights that the appetite for investment in South Africa has changed twice since the beginning of the year.
“At first, investor sentiment increased noticeably as the new government came to power. However, as measures promised by the new administration did not come to pass, investors adopted an attitude of ‘wait and see’ and that is where the industry finds itself currently,” he explains.
Prévost, however, qualifies his statements by saying that it is still too soon to discount hopes for Ramaphosa’s New Dawn for investment.
He hopes that South Africa’s investment environment will present a clearer picture after next year’s general elections.