Some bankers still dig coal, but the insurance industry is starting to throw some spanners into the sector’s works.
That was the message from Mxolisi Mgojo, CEO of South African coal producer Exxaro and President of the Minerals Council, at the Investing in African Mining Indaba on Tuesday, 4 February. Asked about the sector’s access to capital, he said: “There is not one bank that has said they are not going to fund any coal-producing projects thus far in South Africa. So the access to capital in South Africa from the banks for coal projects is still available.”
He went on to say that getting insurance policies renewed was becoming trickier and costlier.
“We do however acknowledge the fact that your input insurance for coal projects is by and large beginning to increase. Just trying to get insurance renewals which is mostly from the international insurance industry is difficult, there is pressure coming there on ESGs. That is where you are now getting increasing costs in terms of financing your insurance,” he said.
The Minerals Council has 17 coal mining members, and so it can be expected to go to bat for the industry. It said in a statement on Tuesday:
“For the foreseeable future in South Africa, coal remains a necessity as the base load source of power even with the expansion of renewables.”
This echoes the government’s line and of course, all of South Africa’s coal-fired power plants can’t just be shut off tomorrow without collapsing the economy. This is no excuse for inaction given the gravity of the unfolding climate crisis, and greens would obviously like to see a faster transition to a low-carbon economy.
The Minerals Council also spoke about costs.
“A further key factor is the communities and employees whose livelihoods depend on coal mining. In countries where policy decisions have been made to eliminate coal power, compensation for this loss of revenue to affected businesses and communities is significant. A comparative exercise looking at what Germany plans to spend on this compensation shows a figure greater than South Africa’s combined annual expenditure on health and education,” it said.
It goes without saying that the South African Treasury doesn’t have the funds to compensate communities or workers that lose coal mines or jobs. The sector employs a workforce of around 100,000, and job losses are politically toxic in the current slow-growth environment, with or without union resistance.
One thing is certain: the debate around coal in South Africa is just heating up. BM