Opinion: Is Coal Worth More To South Africa Than Gold?

Written by Staff

From MoneyWeb. Story by Sungula Nkabinde.

Coal has leapfrogged gold as South Africa’s most important resource, contributing more to gross domestic product, according to StatsSA.

As the resource has become critical for electricity generation in South Africa, a protracted coal mining strike could leave the economy in a worse state than if gold-sector negotiations turn sour.

Xavier Prévost, senior coal analyst at XMP Consulting, said coal was the top contributor to South Africa’s GDP in 2014 with 101.5 billion rand ($8.319 billion US) in revenue.

Gold was at R46.8 billion ($3.83 billion US) , behind Platinum Group Metals (PGM) and iron ore, which generated R77.5 billion ($6.35 billion US) and R58.7 billion ($4.81 billion US) in revenue respectively.

“Coal (is the most important commodity for the future of South Africa’s economy) because it is our source of energy. Without it the whole country will be paralysed, including the gold, iron ore and PGM mines,” said Prévost.

The upcoming coal sector negotiations therefore should not be overlooked, especially given that the industry is facing tough challenges of its own, all of which could have an impact on the outcome.

Talks of coal being declared a “strategic resource” and the carbon tax are examples of proposed legislation that would be a major blow to the industry if ratified.

This has largely resulted in the lack of investment in coal mines, according to Prévost. Along with the global coal glut and low demand that is keeping prices low worldwide, the coal wage negotiations could be anything but smooth.

Solidarity chief negotiator Gideon du Plessis said the coal industry is enduring a difficult period but it’s in slighter better shape than gold is.

Read more at MoneyWeb.