[Eskom][Coal] PETER BRUCE: Gwede’s power permission plan is coal comfort for investors

PETER BRUCE: Gwede’s power permission plan is coal comfort for investors
Everything Mantashe utters or does is, in one way or another, about protecting coal or drawing out the decline in its use for as long as possible
Gwede Mantashe speaks during the first day of the Mining Indaba in Cape Town. Picture: RODGER BOSCH/AFP Gwede Mantashe speaks during the first day of the Mining Indaba in Cape Town. Picture: RODGER BOSCH/AFP
It’s Mining Indaba time again. You can’t find a hotel room in Cape Town and everyone’s waiting for minerals & energy minister Gwede Mantashe to top his announcement in Australia last year of the discovery in SA of an entirely fictional new, and extremely valuable and rare, mineral.
In fact, the wait may already be over. Mantashe as minister of mining and well as energy, gets to decide not only who mines but who generates energy and, crucially, what they’re allowed to do with it. He is also a coal guy — grew up with it, deep in the unions around it (hence his close relationship with President Cyril Ramaphosa, the original founder of the National Union of Mineworkers).
So everything Mantashe utters or does is, in one way or another, about protecting coal or drawing out the decline in its use for as long as possible. Unions recently accused him and his wife of secretly owning shares in a coal mine but the claims proved impossible to verify.
Investors were apparently cheered on Sunday and at the indaba opening today when Mantashe, in his laid-back slightly whacky style, told them they could go ahead and generate their own electricity because it was clear Eskom cannot adequately power the mining industry anymore.
This is the way he said it today: “These realities force us to take serious decisions. That’s why we have agreed that because we have problems with energy, we must allow our mining companies to create energies for self-use. You will not need a licence for that, you just generate for self-use and you run ahead.” Here’s Fin24’s excellent Khulekani Magubane.
But watch it. There’s no regulation in there, not even a whiff. Inviting a mining house to generate its own power in SA as if it were a mere flick of the wrist is typically dismissive of Mantashe. Do mines have to build a power plant wherever they have a mine? Or can they transmit from one plant to their, say, four mines? And if you transmit, on whose lines do you do that? Eskom’s? I doubt it.
At a press conference after his speech, he elaborated. By all means build your own power plant for your own use, he repeated, “run ahead” and “you will not need a licence for that”. But if you want to sell power back into the grid, then you have to get a licence. And that’s the thing about Mantashe. He knows from the very start that you want to sell surplus power back into the grid. He also knows that the fancy new CEO at Eskom is encouraging big private sector companies to generate electricity and sell their surplus to Eskom.
But look at it through Mantashe’s eyes. Anyone helping out Eskom with power not created from coal is lessening Eskom’s dependence on coal. That makes you a natural enemy. He told the press conference that if people wanted to sell power into the grid they would need ministerial permission, which he would give them.
I would not take that as a given if I were an investor. Mantashe is an opponent of liberalising the domestic energy market and that bit about ministerial permission opens a conversation for each power project which, if it involves Mantashe, could literally go on for years. If you have a project ready to go, like now, and it involves selling power back into the grid I guarantee you will not see this minister’s signature on a licence agreement for three years, if at all.
Only a very brave investor would build a power plant to operate a mine in SA. So we can take it for granted that all such investors would want to sell surplus power back into the grid and having arrived at that simple observation we get to another more important one, which is that Mantashe telling investors “you just generate for yourself and run ahead” was rubbish and that he knows it.
Mantashe already has at least five applications on his desk from companies that actually won bids back in 2014 to supply wind and solar power into the grid. They need him to give them the go-ahead to get financing in place and to build their projects. But he won’t sign and he won’t say why.
My advice to investors attending the Mining Indaba is not to trust a word Mantashe tells you. He is devious. Good company. But devious. Now chair of the ruling ANC, Mantashe has begun to play a long political game, of which you are all a part. His easy remarks at the indaba try to position him as market amenable, if not exactly friendly. Mantashe is a communist. When he wanted his son to learn how to farm he sent him to China.
The game is to position himself as a plausible leader of the party should Cyril Ramaphosa fail to get a second term. We will know more or less what that prospect looks like after the party holds a national general council (NGC) this winter. If, after the NGC, Ramaphosa does not put his foot on the economic accelerator he will be doomed. Various factions will thrust and parry for the job but Ramaphosa still represents a decent strain in the party that includes Mantashe but not other potential rivals like deputy president David Mabuza, Nkosazana Dlamini-Zuma or treasurer-general Paul Mashatile.
They come out of the unions and they were never in exile, where the ANC got lazy and full of itself. They are different. In many ways, Mantashe keeps Ramaphosa vertical in these stressful times. He keeps the party in line in parliament and the national executive committee too. Ramaphosa is walking the tightest of political lines and he could not do it without Mantashe. And if Ramaphosa were to fall, Mantashe would be best placed to hold together what modest natural constituency Ramaphosa has been able to accumulate.
If you’re visiting for the indaba you’ll get a taste for the pressures building up on Ramaphosa to “do something”, as the country teeters on the edge of a final ratings downgrade to junk, from this Bloomberg wrap of his problems.
SA is interesting (and, for me, nonthreatening) because of people like Mantashe. I’ve been extremely rude about him in print in the past and he never fails to greet me cheerfully when we meet. The thing to understand about us as a country is that we are conservative and risk averse. Normally that’s good. But our history of separation and cruelty plays its own tricks.
All South Africans want to live secure and meaningful lives. We want our kids at decent schools, good doctors to see us quickly when we’re sick and a place to call home. But we come at that common vision from very different paths. In a way we’re a clash of cultures and rank bad behaviour. We’ll settle down eventually. Whether that “eventually” is in anyone’s investment timeline is moot. Settling is going to take a hideously long time.
Meanwhile, welcome.

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