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KEYNOTE ADDRESS BY MR RF BOTHA, MINISTER OF MINERAL AND ENERGY AFFAIRS: "A NEW SOUTH AFRICA : COAL EXPORTS IN TRANSITION", 24/10/94.

- Mr Chairman
- Distinguished leaders of the coal industry world-wide;
- Esteemed guests.

I am conscious of the practice of beginning a speech by saying what a pleasure, honour and privilege it is to deliver the speech. So much so that one seeks at all costs to say something different. I would like to try this one out on you : "I have just flown here throughout the night from the most southern part of Africa. On top of it, my country is entering its summer period with lovely sunshine and outdoor living whereas Europe is approaching winter. This alone requires a fair degree of adaptation. I believe that I should therefore be honest by saying that, yes, thank your for the invitation. But if it wasn't for the high quality and distinction of the delegates present, it would all have been a rather costly and cumbersome excursion to get here!"

I am particularly gratified by the special mention which South African has received in your promotional brochure and the prominent place which it occupies in your programme. I must add that I feel that your attention is justified! My country has emerged as a country of hope, from the vortex of the racial storm which threatened to overwhelm it. A democratic Government of National Unity has come into being with our major institutions intact and ready to serve all our people - particularly as they are becoming more representative of our population profile.

Coal is one of the most fascinating commodities on our planet. Its history is equally fascinating. The People's Chronology, " a year-by-year record of human events from pre-history to the present" compiled by James Trager, first refers to coal in 301BC. In that year, the Greek philosopher Theopharastus mentioned fossil substances "called coals, found in Liguraia and Elis, which kindle and burn like woodcoals. They are used by smiths, "he concludes.

In 852, the Saxon Chronicle of the Abbey of Peterborough states that the Abbot of Ceobred has rented the land of Sempringham to one Wilfred in return for "60 loads of wood, 12 loads of coal, 6 loads of peat, etc..."

So although coal was laid down many millennia ago, it has also been taken up in our lives for what to us is a relatively long time. Yet it is sobering to consider what these ancestors of ours started when they played with those first few lumps of coal. To be sure they were taking the first few steps on a road that would lead to the industrial and other revolutions and then on to an energy explosion beyond their wildest dreams.

I notice that one of the organisers' preliminary letter indicates that I will "enunciate the South African Government's commitment to the gradual transformation of South Africa's mining industry". This is probably as apt a way of putting it as any.

And it is in this regard that I want to give certain assurances to you. In what one might almost call the 'post-Rubicon' situation in which we find ourselves in South Africa, we are experiencing confidence and a deep sense of reality concerning the current and future development of our cost. We realise that we have a long way to go. We know that violence and crime must be curbed. We acknowledge and accept the basic requirements for economic growth. We will guarantee fundamental human rights for all our citizens as well as those who come to us from beyond our borders.

President Mandela has publicly stressed that the economy will not be based on government intervention but on a market-orientated system. He has indicated the Government attaches great importance to the reduction of the deficit, to fiscal and monetary discipline, to bringing down taxation and government expenditure. These statements, and the way the economy is being managed in practice, should make it clear that South Africa has no intention of embarking on economic adventurism.

indications are that at least our host country, Germany, and the United States have read and understood this message. The South African-German Chamber of Commerce and Industry commissioned Pabst & Pabst Consulting to do a survey of 365 German companies operating in South Africa. Their findings are interesting. 81 % - including every one of the 20 biggest companies - rated the South African Economy good to sufficient as against 58 % in the last survey. A further 28 % of the respondents said they have already increased their investments and/or created new jobs since the April elections. 51 % are considering increasing their financial investment.

In addition, according to the Washington-based Investor Responsibility Research Centre, the number of United States companies which have employees or direct investment in South Africa has increased by 20 % to 169 since September 1993 when Mr Nelson Mandela, now our President, called on the world ton end economic sanctions against South Africa. Companies like Kodak, Coca Cola and Apple Computers are all coming back to South Africa.

And don't forget the US rating agency Moody's assessment of South Africa is BBB : 'investment grade'. The time is ripe for international companies to invest in the local coal scene in South Africa. We want you to buy equity, making profits and enjoying dividends, instead of receiving interest on loans.

The fundamental policy of the South African Government of National Unity is set out in the Reconstruction and Development Programme, known for short as the RDP. The RDP is a vision of the transformation of our society and nation. Key sub-programmes have been identified to drive the RDP, covering urban renewal, rural development, human resources advancement, democratisation and institutional reform, economic restructuring and the elimination of poverty.

For example, a programme has already been approved to provide electricity to 500 000 homes annually so that 2,5 million additional homes will have electricity by the end of the century. The number of existing electricity connections - 2,1 million homes - will more than double, bringing the percentage of South African enjoying domestic electricity from 35 % to over 60 %. This could require up to 7 gigawatts of additional electricity demand, well within the present estimated generating surplus of 9 gigawatts.

The RDP will not be implemented in such a way that it will overburden and restrict the economically productive sector. True, the RDP is indeed dedicated to the upliftment of our people. but it is also firmly rooted in the productive economic policies of the world's successful nations, namely, a market-orientated economy and all the good stewardship that goes with it. There is no inherent inconsistency between these town pillars of the Plan.

Strict budgetary and fiscal discipline, as well as a business plan, is required for all Reconstruction and Development Programmes. All projects are subject to auditing and performance assessment.

The RDP fully recognises that economic development and growth, with their stringent requirements of the market place and the bottom line, are fundamental for success. It does not matter how lofty, noble or commendable any blueprint for human development and upliftment will not be forthcoming and we will drown in the current of good intentions.

I am emphasising these points of departure in the RDP because I believe that your would wish to be assured that business with South Africa will not be threatened by policies which have led to failure elsewhere. We are not about to make the mistake of those who followed pied-piper ideologies, only to end up in the backwaters of the world.

Backlogs will have to be eliminated across the whole socio-economic spectrum. A large number of affordable houses will have to be built, as well as schools, hospitals, community and recreation centres. The infrastructure to accommodate these will also have to be developed. Access to basic necessities and employment, as well as to the economy itself, will have to be increased and significant strides will have to be made in respect of education and training. Burt the wealth-generating aspects of the economy which will provide the resources for these programmes will also need to flourish.

The minerals industry is playing a major role in this process. The success of the Reconstruction and Development Programme depends to large extent on the ability of this industry to increase export income, thereby improving our balance of payments. We can achieve this by expanding mineral exports and judiciously increasing local mineral benefaction, activities which require increased investment. A tripartite process of consultation and co-operation between Government, the minerals industry and labour is also essential to achieve the objectives of the RDP.

Another concern of those wishing to purchase South African minerals is to know where our mineral rights regime is heading. In keeping with our democratice approach to things, one of the aims of government is to improve access to mineral right. But at the same time the government also recognises that it would be economic folly to introduce any drastic measures which might strip existing mineral right shoulders of their title in a way which threatens security of tenure, destabilises markets and makes future projections of mining activity impossible.

Instead, the government is busy identifying areas not exploitable by existing mineral right holders whether by reason of economies of scale. the nature of the deposit of for company policy considerations. The government is also seeking to persuade larger mining companies to allow small miners access to any of their mineral rights which would be suitable for small mining activity.

The basic principle behind this approach is that the general good of all the people is better served by having an efficient mining sector with as developed a small mining sector as possible alongside it. The alternative is to destroy the wealth-creating activities of large mining for the sake of freeing mineral rights which no small miner could exploit anyway.

After going down a coal-mine in 1909, Lloyd George spoke of "pit-props bent and twisted and sundered until you saw their fibres split" and, when a spark ignites, of "the breath of life being scorched out of hundreds of breasts by the consuming fire". Coal-mining has always had particular hazards of its own. They are present even today, but will continue to diminish as our skills in combating them improve.

South Africa is constantly striving to upgrade the health and safety of its mine workers. Cabinet approved the appointment of a Commission of Enquiry on this very issue. it is due to report to government by January next year and we will give effect to desirable recommendations of the Commission.

All of us who benefit from having coal brought up to the surface by these miners, should pause now and then to remember and acknowledge the sacrifice and hardship of them.

I would like to give you a statistical glimpse into the South African coal industry. The figures relate to last year, 1993.

South Africa produced 182,2 million tons of saleable coal, an improvement of 4,5 per cent on the previous year. 131,7 million tons were consumed locally, partly from stockpiles. This represents almost 60 percent of the value of total local mineral sales.

We export 28 % of our production, being 51,7 million tons worth $1 275 million. Destinations were mainly Europe and the Far East, although increasing tonnage's are also being shipped to other regions of the world. This represents some 13,8 % of world exports of hard coal. After gold and the platinum-group metals, coal is the biggest contributor to foreign exchange earnings for South Africa.

Coal also contributes to the production of liquid fuels in the country through the liquefaction process applied by the well-known company called Sasol. The synthetic fuels industry consumes some 30 % (40 million tons) of locally utilised low -grade and virtually unsaleble coal, to produce 35 % of all liquid fuels consumed in South Africa. Coal at a Value of $10 per ton is beneficiated into petrol, diesel etc. worth $200 per ton, in a unique one-step process. In addition, petro-chemical feedstocks are further beneficaited into higher value chemicals - acids, industrial gases, waxes, detergents, rubber, film, plastics, fabrics, fertilizers, pesticides, paints, toiletries, industrial inks, mining chemicals, metallurgical electrodes, resins and explosives, bitument, road tars, creosote and sulphur - some of which exceed $1 000 per ton in value.

These products, 120 in all, are exported to 57 countries, 16 of which are in Africa. Many lives are impacted by these coal-based products : the daily splash of deodorant, the was on shoes, the resin in car brake pads, the ethylene gas to ripen bananas, plastic components in motor cars and kitchens, acrylic fibre in blankets and jerseys. All these and many more have components source in lumps of coal well below the surface of the earth.

Had we not had any coal, we would have had to import 587 million barrels of oil annually for our energy needs. At present we import only 116,8 million barrels. These extra barrels would have substituted the 25,3 million tons of coal used for synfuel production and the 106,4 million tons used for power generation and uses such as Sasol's electricity, gas and chemicals production.

The total annual bill for our imported oil would then have been $10,6 billion, an amount that would have greatly burdened a South Africa striving to get under way economically. As it is, crude oil represents only 12 % of South Africa's total energy consumption. So one could describe coal fairly literally as the fuel that has enabled the South African economic locomotive might still have been idling in the station.

The industry is a major player in job creation. it has an average of 60 600 employees on its payroll, supporting an estimate 300 000 dependents.

Electricity generation account for about 56 per cent of local coal usage, with coal-fired power stations contributing more that 90 per cent of electricity output. South Africa's low-cost electricity is an important element of the mining and mineral beneficiation industry's competitive advantage.

Because of easily accessible deposits of coal, and in the absence of significant petroleum, natural gas and hydro-electric potential, coal has become our primary source of energy, providing more that 80 per cent of South Africa's needs. Crude oil, biomass and nuclear fuels make up the balance.

South Africa's coal reserve base of some 55 billion tons of economically recoverable, inherently low-sulphur, bituminous and anthracitic coal represents abour 10,5 per cent of world hard coal reserves. At current rates of production, our coal wool last for three centuries.

About 50 million tons of coal (some 96 per cent of South Africa's exports) were exported through Richards Bay harbour in 1993. The Richards Bay Coal Terminal became operational in 1976, at a design capacity of 12 million tons per annum. This was increased to 24 million tons per annum two years later, and to 44 million tons per annum in 1984. The present capacity of 54,5 million tons per annum was reached in 1992. The 600 km rail link established between Richards Bay and the main coal-producing areas was upgraded during the late eighties to comfortably handle present commitments.

South Africa currently uses a high percentage of its coal export capacity. the Richards Bay Coal Terminal is controlled by producers responsible for over 60 % of South Africa's saleable output of coal. With a modes capital outlay, it can be expanded to a capacity of 62 million tons per annum. Another group of companies producing over 30 % of the saleable coal output, but with no or a very small export allocation through Richards Bay harbour, Its estimated cost is $200 million. Expansion of the rail capacity of the Richards Bay line by 35 million tons will require investments in railway track and rolling stock of around $170 million.

South Africa has an abundance of mineral resources. Gold, the platinum-group metal, the ferrous mineral and coal are foremost among them. More that 60 different minerals are produced from 900 mines and quarries. Mineral commodities valued at $11 billion were exported to 85 countries. Our mineral and mineral-related exports earn 65 % of our total export revenue and are 23 times higher than our mineral imports.

From all this it can be seen that our mineral industry is a powerful industry. Coal will continue to dominate South Africa's energy scene for many years to come. Not only is coal needed to support industrial and economic development, but it is privotal in ensuring that all our people have ready access to affordable and appropriate forms of energy. The success of the new South Africa will depend on the contribution of the coal industry.

If this industry suffers South Africa suffers. We are therefore going to take good care of it from a commercial, fiscal and monetary point of view.

I have already described the rapid, one-third annual increase in the Richards Bay harbour capacity during the late seventies and early eighties. Over the same period, South Africa's coal exports increased by an average of 70 % per year. An analysis of coal markets during that time shows a buoyancy in international coal prices in the wake of the oil shocks of those years.

This brings me to an important point. South Africa has a long and proven history of a steady and consistent development of its mineral wealth. Its coal sales are entirely unregulated and unsubsidised. The coal resources, and the skills necessary to exploit them, are available. A modern and flexible transport infrastructure is in place. Other ancillary services are sophisticated enough to meet the needs of the most demanding trader or entrepreneur.

South Africa is fortunate in that a high degree of synergy exists between its domestic use of coal and export coal. Because of the inherent characteristics of our coal resources, the local energy industry is designed to consume mostly low-grade coal. This minimises competition of export quality coal, which represents 18 % of South Africa's recoverable coal reserves. This complementary means that most major South African coal producers hold reserves of both low-grade and export-quality coal - well illustrated by the many multi-product mines that have been established. A rise in domestic demand for coal will, therefore, not necessarily reduce the availability of coal for export, but could even increase it. South Africa's own dependence on coal is the surest guarantee to our overseas clients that they can rely on consistent supplies.

South Africa is now a fully fledged member of our regional organisation, the Southern African Development Community. There is a world-wide move towards the forming of trade blocs and we in Africa are preparing ourselves to meet the challenges this presents. Tangible evidence that we are succeeding is the ongoing process of interconnecting and expanding the electricity supply network in a Southern Africa Power Pool.

An integrated approach to mines, railway lines and harbours in the Southern African Region will yield many benefits. For instance, 425 000 tons of coal were exported through Maputo in Mozambique last year. This port can be developed and upgraded to handle higher export quantities. Although the active participation of an institution such as the World Bank would be required, annual coal exports of at least 5 million tons could result.

Consumers of coal world-wide might have to come to terms with the possibility that, in order to secure supplies - especially if expanded - international markets return to more realistic price levels. This will ensure investors in new mines and infrastructure a reasonable return on the high-risk investments required. With the demand for steam coal forecast to increase by some 20% between 1993 and 2000, strapped suppliers will hopefully be able to realise significantly improved prices.

If coal is to hold its own in the future, it will have to find ways of overcoming its stigma as an anti-social personality which poses a threat to the environment. Coal is for the most part an acceptable, even popular, energy source. It is one of the 'big three' in the world, which together provide about 88 % of commercialised energy. Coal is about 30 % of this. It is accessible, efficiently and relatively cleanly exploitable, transportable, convertible into other energy forms and an excellent feedstock for plastics and chemicals.

Unfortunately, coal does have delinquent tendencies which contribute to acid deposition, urban air pollution and global warming. The recent on third reduction in the United States of sulphur dioxide emissions despite a 50 % increase in their use of coal sets a highly commendable example to all of us. After all, if we are to continue buying and selling coal we will only be able to do so if we can rehabilitate the negative aspects of coal's personality which I have mentioned.

It is gratifying to me to know that South African coal has a relatively lower carbon and higher hydrogen content which, on combustion, produces less carbon dioxide for the same amount of energy than coals with higher carbon contents. South African coals are therefore less unfriendly to the global environment.

We cannot discuss coal with facing the ominous problem of global warming. We hear a lot about "promising, gratifying progress", "a lot of research being done", "serious attention being given" and in-depth studies being made". But this is not enough. The time for clich�s is past. The degradation of our planet cannot be allowed to continue at its present rate without stronger environmental protection measures being taken. We need more action, not more talk, We need a sense of urgency. The world is too complacent in the face of this serious threat.

We require more money to finance more effective research. We require the political will and the means to put the remedial measures into practices. Coal producers and users world-wide must become more effectively involved in a centralised effort to pool the world's best brains. We must find the kind of solutions that will reverse this disastrous trend before it is too late.

Since known coal resources are five times those of oil, the long-term future of coal is vital to the energy future of the world. Suppliers and consumers owe it to the world to make coal environmentally acceptable.

To conclude : the new South Africa will continue to be a significant force in the international coal market whilst undergoing political transition. South Africa has the resources, the infrastructure, the skills and the will both to transform its society and to remain a dynamic and reliable supplier of good quality coal. I invite you to engage in profitable and satisfactory ventures with us while at the same time making your contribution to our reconstruction and development, by buying more South African coal, - but, please, at higher prices.

HAMBURG
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